GSE to close 2025 with 60% return

…with financials, FMCGs powering Accra bourse to best in decade performance

By Ebenezer Chike Adjei NJOKU

The domestic equity market is forecast to deliver between a 55 percent and 65 percent return – 60 percent, (±500bps)-–  by the end of 2025, with the Ghana Stock Exchange Composite Index (GSE-CI) projected to close the year at 7,828 points, according to Databank Research.

The outlook, contained in its Ghana Market Outlook for second-half of the year, comes on the back of growing investor rotation into equities amid falling Treasury bill yields, stable currency conditions and resilient corporate earnings led by the banking sector. If realised, it will represent three consecutive years of positive returns, beating last year’s 56.17 percent, 2017’s 52.73 percent and second to the 78.81 percent recorded in 2013.

The projection builds on momentum established in first-half of the year, when the GSE-CI reached 6,248.48 points despite a dip in the market’s heaviest mover – MTN – following an announcement that it will restructure its MobileMoney LTD (MML) into a new company, New FinCo, to comply with payment systems and services regulation.

Earlier in the year Databank had forecast a more modest return of 40 to 50 percent, or 6,850 points. The improved outlook is driven by faster-than-expected disinflation, an easing interest rate environment and a rally in financial stocks.

Yields on short-term government securities, once above 30 percent at the peak of inflationary pressures, have fallen sharply. In the first quarter, the 91-day T-bill dropped to 15.71 percent while the 182-day and 364-day bills declined to 16.73 percent and 18.65 percent respectively.

By June, the 91-day had eased further to 14.69 percent, the 182-days to 15.25 percent and the 364-days to 15.66 percent. With fixed-income returns compressed, institutional and retail investors shifted capital into equities, particularly financial stocks offering dividends.

The banking sector has emerged as an anchor for the rally as the GSE Financial Stock Index (GSE-FSI) surged 41.8 percent in first-half of the year to a 14-year high of 3,376 points.

This extended the first quarter’s strong gains, when the sector advanced 28.5 percent – its best quarterly performance in seven years. Renewed dividend payouts, improving asset quality and resilient earnings have underpinned the recovery, with GCB, Ecobank Ghana and Standard Chartered among the top performers. Databank expects further dividend declarations in the second half to support valuations.

“From a technical analysis perspective, we have revised our year-end forecast for the GSE CI upward to 7,827.56 points – indicating an annual return of approximately 60.12% (±500bps),” the report stated.

“The financial sector is expected to remain resilient in HY ’25 despite pressures from yield compression on short-term Treasury securities. Banks have maintained robust credit underwriting systems even as lending rates decline. Financial Soundness Indicators (FSIs) point to continued asset growth, improved solvency, profitability and liquidity. The non-performing loans ratio has slowed, supported by slower NPL stock growth relative to credit expansion,” it added.

Insurance has also delivered strong returns. State Insurance Company soared 322 percent in the first half to a 17-year high of GH¢1.14 per share, after reporting a turnaround in profitability and sharply higher margins. The segment is also “set to benefit from rising household disposable incomes”.

On the other hand, the NewGold ETF was the market’s only laggard, declining 10.6 percent as the cedi’s strength eroded local returns despite elevated gold prices.

Consumer-facing companies are also benefitting from the improved operating environment. Fan Milk posted robust top-line growth in the first half and is investing heavily in brand visibility and distribution, while Unilever is seeing volume recovery despite margin pressures. Guinness Ghana Breweries, buoyed by price increases and a strategic repositioning, is expected to sustain earnings momentum through the year.

Agriculture-linked equities remain in focus. Benso Oil Palm Plantation is projected to extend gains on the back of rising global crude palm oil prices, improved throughput and disciplined dividend policy. The company’s revenues have compounded at roughly 30 percent annually since 2020 and management has invested in additional extraction capacity to support volumes.

Overall, the market saw 18 gainers compared to a single loser. Nonetheless, overall activity weakened: trading volumes fell 74.2 percent year-on-year to 150.9 million shares while turnover slipped 5.2 percent to GH¢933million, underscoring thin liquidity on the secondary market.

Still, risks remain as liquidity constraints may continue to limit trading volumes while fiscal slippages and energy sector debt could undermine sentiment. Externally, a stronger US dollar or sharp swings in commodity prices could weigh on the outlook.

Databank has however maintained a positive stance. It highlights MTN Ghana, GCB, Ecobank, Standard Chartered, Benso Oil Palm Plantation, TotalEnergies, Unilever and Fan Milk as top picks until year-end.

“Declining yields, easing inflation and a stable currency provide a favourable operating environment for corporates and we anticipate continued gains into year-end,” the firm noted.

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