In the first quarter of 2016, I hope to put more of my money (60%) in safe income securities like short term mutual funds and treasury bills. This I believe would give me enough time to make some important financial decisions in my life.
Parkinson’s Law is mostly applied to productivity which states that work expands to fill the time available for its completion – and this means that if you give yourself a week to complete a two hour task, then (psychologically speaking) the task will increase in complexity and become more daunting so as to fill that week.
This Week in focus on the Ghana Stock Exchange (16-01-12 to 20-01-12)
Overview of Company
CAL Bank Limited formerly Continental Acceptances Limited and then CAL Merchant Bank was incorporated on March 20, 1989 but the bank was licensed in June 1990 and commenced business in July 1990. With issued shares of 238,802,978, CAL Bank is listed on the Ghana Stock Exchange (GSE) and the share price is 0.23p as at December 6, 2011. We would be looking at how this bank performed on the GSE for the 2011 financial year.
As at 31st December, 2010, the Social Security and National Insurance Trust (SSNIT) held 82,363,074 shares in the bank making 34.13% whiles Mr. Afare Donkor, the largest individual shareholder and second largest shareholder held a stake of 7.51% representing 18,120,000 shares.
CAL Bank began the year, 2011 with a share price of 0.33p (04/JAN/2011) and because of investor activities & active trades, share price of the bank rose to 0.39p (04/FEB/2011). Meanwhile, the stock price dropped steadily after that time to close at 0.26p on 22/March/ 2011. Further fluctuation of price was recorded from July to October 2011. Ten months down the year, CAL recorded a Year high of 0.39 pesewas and Year-Low of 0.25 pesewas (p). The volume of trade heightened at the end of October and hence was reflected by an increased in share price by some pesewas.
CAL stock and other financial stocks performed badly in November making the Financial Stock Index remain lower than the Base index of 1000.
I would be writing on Ecobank Ghana Limited (EBG) in my next post. I would be reviewing EBG stock on the Ghana Stock Exchange for the Year 2011.
[Courtesy: Ghana Stock Exchange, Bloomberg]
I decided to write this because of some questions posed to me by some followers of this blog and it is all about the Ghana Stock Exchange. “Is the Ghana Stock Exchange a company?” she asked, If it is a company then who owns it and what do they do? If not a company then what is it?
Just like a market for trading fish, tomatoes, yam and other products, the Ghana Stock Exchange is a platform for trading securities (shares, bonds, futures, etc). Sellers bring their products and buyers come to buy. But because there are a lot of sellers and buyers, they are represented on the Exchange by Licensed Dealing Members (LDMs), (what people called Brokerage Firms or brokers). This means as a buyer or a seller, you cannot go to the exchange to buy or sell yourself (although some do).
The Ghana Stock Exchange plays a major role in securities industry regulation and is thus classified as a Self- Regulatory Organization. With respect to its numerous responsibilities, it simply monitors trading. It has Directors just like a company but the Securities and Exchange Commission oversees its regulation by making sure they do what they are supposed to do in the market and what is appropriate under the Security Industry Law (SIL)- the principal regulator.
When Public Limited Liability Companies want to raise capital for their business, the list shares on the exchange (that is, allowing people to own part of their company), so when investors study the company and find that the company is good and strong among other factors, they contact their brokers for them to make the trade – money, for part of the company. That is what the Ghana Stock Exchange oversees; that the right amount is paid and the ownership rights of part of the company is transferred to the name of the buyer or investor (in form of shares).
Finally, the Ghana Stock Exchange is privately financed and managed with the budget mainly financed by its members (LDMs and Associates) and issuer companies.
Growth stocks are stocks in a company that are growing fast and reinvesting their profits rather than paying high dividends. The share prices of such stocks grow and double or sometimes triple in days or months on the Exchange. Investors with the purpose of keeping their monies in the market for a longer time invests in this kind of securities to gain on their capital.
On the Ghana Stock Exchange for instance, shares of FML,EBG,FML,GCB,GGBL,SCB,TOTAL and UNIL are growth stocks since for the past five(5) to six(6)years their share prices have been increasing and profits are being reinvested. Standard Chartered Bank shares are currently priced in the Market at GHC 64.00 per share, meanwhile less than 3 years ago, this stock was priced than lower GHC 25.00 per share. This obvious is almost a triple jump in capital gain of the stock(SCB). Other growth stocks also perform really well on the GSE in terms of share prices.
One question is that, what is the benefit of investing in Growth stocks on the GSE? CAPITAL GAIN, is the answer. These stocks grow in share price because directors of such companies do not focus on only paying high dividends but rather reinvest the profits and in that case the company grows and investors build confidence in the stock hence invest. The demand of the stock on the market positively affect the prices of the shares on the market.
Growth investing is good and very rewarding but remember it requires time and patience. Keep investing and invest wisely.
This stock performed badly when it started trading and now it has fallen lower than half its initial share price.
One lesson from this investment is that, an investor should not to rush into investing but to study the market very well especially IPOs.
As an investor, one must consider so many factors before buying a stock or venturing in the capital market. The Ghanaian Capital market is becoming robust every single day and hence requires more attention and advice to invest and gain from it. Brokerage firms are sprouting from time to time and that means people in Ghana are now seeing the need to take the investment job serious hence the need for investment advisers. Competition is getting keen but the question is how prepared is the market for first time investors- those that know very little about investing. Is it true that the majority of investors on the exchange invest with their sentiments with very little or no investment advice?
How many investors understand the GSE Security Depository (GSD) System and know the investment laws enacted by the Security and Exchange Commission (SEC)? Answers to these questions should caution the Ghana Investment Promotion Centre (GIPC) to be more active. I entreat all first time investors to study the market or seek advice from experts (brokerage firms) before investing. You can make a lot of money in the stock market, just ask how?