Databank: Profit-taking may be risk to Ghana equities rally in H2’24

Databank, a leading financial institution, expects progress in economic recovery to anchor the stock market rally in Ghana as the country navigates the second half of 2024. The bank's analysts have observed a positive sentiment among investors regarding the economic rebound, but they also highlight profit-taking activities as a potential risk that could dampen the market's outlook. In a recent interview with CNBC Africa, Mac-Jordan Narteh, Research Analyst at Databank, shared insights on the key factors driving market movements and the potential challenges that lie ahead. Narteh emphasized the impact of profit-taking on the market sentiment, despite ongoing positive financial performance. He noted that while profit-taking activities have been observed in some stocks, the overall market remains positive, fueled by strong financial results. The banking sector has been a significant contributor to the market rally, with notable improvements in profitability. Financial institutions like Cow Bank and KuBank have reported substantial turnarounds in their financial performance, signaling resilience amid economic uncertainties. Non-financial stocks have also shown a mix of positive and negative trends, with overall stability in gross profits. Narteh highlighted the cautious approach taken by banks in leveraging high yields on government securities due to subdued loan book growth. While banks are expected to benefit from lucrative treasury bill rates, the slower pace of loan book expansion suggests a conservative strategy in deploying customer deposits. Despite the encouraging half-year financial results released by companies, Narteh mentioned that the market has yet to fully absorb the impact of these numbers. Stocks like Total Energies and MTN have already shown price appreciation, reflecting positive half-year performances. However, Narteh believes that there is more room for the market to reflect the robust financials of various firms as investors digest the numbers and assess companies' strategic responses to prevailing economic challenges. Looking ahead, Narteh remains optimistic about the market outlook for the rest of the month, citing continued investor appreciation of positive financial developments. While anticipating a positive trajectory, he also cautions against the risk of profit-taking activities by some investors that could temper the market's upward momentum. As Ghana's equities rally enters the second half of 2024, market participants will closely monitor the interplay between economic recovery, profit-taking behaviors, and company performance to gauge the sustainability of the rally.