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12.07.2020 Business Features

Covid-19: Economic Impact Assessments On Ghana’s Stock Market

By Edmund Obeng Amaning & James Afful
Authors: Edmund Obeng Amaning and James Afful
LISTEN JUL 12, 2020
Authors: Edmund Obeng Amaning and James Afful

The concept, financial market and COVID-19, has been widely used and debated differently by different people including investors, government officials and the general public. It’s not a new concept but the upsurge of the debate on financial market has made the concept seemingly new especially in a developing country like Ghana where the sector has undergone a challenging period in recent years and has generated a lot of debate within the public domain.

Historically, the Ghana Stock Exchange was set up to provide facilities and framework to the public for the purchase and sale of bonds, shares and other securities as well as co-coordinating the stock dealing activities of members and facilitate the exchange of information including prices of securities listed for their mutual advantages and for the benefit of their clients.

Over the past few decades, company’s valuation and market capitalization for the firms listed on the Ghana Stock Exchange have been experiencing dynamic changes. This movement of stock prices makes investors skeptical about the future performance of companies. As a result, the stock prices may drop in the short run as well as the long run. In assuring that the investors are in comfort zone about the fluctuation of stock prices, these investors need to know the causes and extent of such influence in the economy.

The COVID-19 shock is seen to be severe compared to the financial crisis in 2007/2008. However, the impact of this pandemic on the Stock Market of Ghana has not been researched. Different International Organizations and Economics Experts have warned that the recent pandemic will have serious impact on the global economy and perhaps the impacts will be surpassing the Global Financial crisis. The World Economic Forum 2020 report asserted that, the corona virus shock is more severe when compared to the 2007/2008 global financial crisis. However, reports have indicated that China’s Stock market remains strong and stable regardless of the current pandemic. According to Xinhuan (2020), China’s financial market remains generally stable compared to other markets outside China despite the spread of the COVID-19.

Our Covid-19 Economic Impact Assessments provide analysis on the pandemic's influence on stock prices, stock market indexes and the investment environment from 1st March 2020 to 30th June 2020 in Ghana.

Figure1.1. Stock Prices of some selected financial institutions in Ghana

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Figure1.2. Stock Prices of some selected Non-financial institutions in Ghana

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Figure1.3. Year to date returns of GSE Composite Index (GSE-CI) and GSE Financial Stock Index (GSE-FSI).

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The GSE composite index (GSE-CI) provides an overview of the performance for the entire listed stocks on the Ghana Stock Exchange whereas the GSE Financial Stock Index (GSE-FSI) provides an overview of the performance of the listed stocks of financial institutions. These indexes basically provide a guide to investors in their decision making with regards to purchasing of stocks on the stock market.

Data from the Ghana Stock Exchange from February 2020 to June 2020 revealed that the stock prices have been declining. For instance, the year to date return of the GSE Composite Index (GSE-CI) declined from -2.01% in February 2020 to -15.83% in June 2020. Similarly, the year to date return of the GSE Financial Stock Index (GSE-FSI) also declined from -2.73% to -14.59% at the same period of time (figure 1.3).

It can also be seen from figures 1.1 and 1.2 that stock prices of most financial and non-financial institutions have been declining with prices of few stocks been relatively stable for the past four months. One can say that investors are selling their stocks in recent months due to the COVID-19 pandemic. Factors such as job losses, reduction in salaries of most employees, decline in sales of most businesses as well as the slowdown in general economic activities in the country have had negative impact on income levels. This development has compelled most investors to sell their stocks in order to raise the needed money for their daily upkeep. Besides, investors are most concerned about the uncertainties that are arising from the pandemic hence, they are being extra careful with regards to where they would put their funds. With this, most investors are now investing in short term fixed income securities such as the government of Ghana treasury bills and cocoa bills at the expense of long-term securities such as stocks and this development is having a negative impact on stock prices. For instance, data from the Ghana Fixed Income Market (GFIM) shows that, investments in fixed income securities grew by a monthly average of 9.73% from February 2020 to June 2020.

To sum it up, policy reactions to contain the virus and level the stock markets are needed, countries are not working together to cope with these challenges, as Ghana Stock Market is responding differently to international-level policies and the general development of the pandemic. Ultimately, this tendency toward disintegration in the global community is more of a threat than the virus. Additionally, granting of stimulus packages in the form of loans at a lower interest rate to businesses by the government in response to the coronavirus pandemic cannot be underestimated. This will boost economic activities, create jobs, and increase the income levels of businesses and individuals which will then increase spending and also boost investors’ confidence to invest long term securities such as stocks.


Edmund Obeng Amaning is a researcher/consultant and holds a Master’s degree in Economics. His research interest includes Finance and Monetary economics, Public finance and Energy. Contact: [email protected] , Cell: +233 54 347 5499

James Afful is a financial analyst and a researcher. He holds a Master’s degree in Economics, MBA Finance and Professional certificate in Risk Management. He is experience in credit risk management, financial modeling and data analysis, investment banking and project finance Contact:afful25[email protected], Cell: +233 24 296 9042.

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