Business | Economy
Oil discovery sends stock index soaring
Start of crude production triggers world's fastest economic growth, but also most volatile equity market
- Bloomberg
- Published: 00:00 June 29, 2010
New York: Ghana's main stock index, the best performer in Africa this quarter, may soar another 40 per cent this year as the start of oil production spurs the world's fastest pace of economic growth, Exotix said.
Exotix, the London-based brokerage that gets a quarter of its revenue from African securities and three quarters from frontier markets, said buy orders for Ghanaian stocks are up more than 50 per cent from the start of the year, even after a 9.8 per cent rally since March 31 drove valuations above the average for emerging markets.
The country's All-Share Index has a further 20 to 40 per cent "upside" in 2010, according to Ashley Bendell, New-York-based frontier and emerging market equity broker at Exotix.
The west African nation's equity market has been the most volatile globally.
It soared 58 per cent in 2008, beating all 93 national equity gauges tracked by Bloomberg, after its discovery of oil in 2007 and as crude jumped to a record $147.27 a barrel.
The measure plunged 47 per cent last year, the world's worst slump, when crude tumbled to as little as $32.70 a barrel and Ghana's currency depreciation triggered 20 per cent inflation and a $1 billion International Monetary Fund bailout.
"The oil find has without a doubt brought a lot of interest," Bendell said in an interview in Johannesburg.
Templeton Asset Management's Mark Mobius said in his blog on June 24 that he's looking at Ghana along with South Africa, Nigeria, Egypt, Kenya, Botswana, Morocco and Tunisia for investment.
Too small
Ghana's index is rising as the IMF predicts a surge in economic growth to 20.1 per cent in 2011, triple the average 6.5 per cent for developing nations.
The cocoa and gold exporter is scheduled to start pumping oil in the fourth quarter of this year. Oil has gained 75 per cent since the beginning of last year to $78 a barrel. The market remains too small to allow larger fund managers to buy and sell stocks, said Bryan Collings, who manages $1 billion in London-based Hexam Capital Partners LLP's Global Emerging Markets fund.
He has no holdings in Ghana and favours China and Brazil.
"I don't think Ghana's all that brilliant, the market isn't liquid and there are often concerns about getting money in and out," Collings said.
"For us, it's key to stay relatively liquid."
The market value of shares listed on the Ghana Stock Exchange is $12.8 billion, according to data from the bourse, a fraction of South Africa's All Share Index at $590 billion, based on Bloomberg data.
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