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The stock market witnessed an improved performance in 2012 compared to 2011. Even though the market traded in a flat trend for most of the year, the fourth quarter witnessed a very strong performance which led the market to post impressive returns. After closing 2011 at a negative 3.10 per cent, the Ghana Stock Exchange Composite Index (GSE-CI) - the index that measures the overall performance of the market, managed to close 2012 at a gain of 23.81 per cent. Interest rates on fixed income investments went up due to the central bank�s interest rate hike to contain the depreciation of the cedi. This resulted in a redirection of interest from the stock market to the fixed income segment of the market resulting in a sudden drop of volume of shares traded by a 25.84 per cent. Twenty-eight of the 37 equities listed on the exchange witnessed price changes with 21 equities recording various levels of price appreication whilst seven witnessed losses. Nine of the listed equities traded flat within the period. INDEX PERFORMANCE With the prevailing high interest rates at the beginning of the year, the performance of the indices were not impressive at the first half of the year. The situation however reverted in the second part of the year as investors resumed their activity on the exchange. The GSE-CI posted a return of 23.81 per cent, closing at 1,199.72 points. The return was a massive improvement over the negative return of three per cent recorded in 2011. The FirstBanC Index (FBI) also recorded a gain of 31.03 per cent to close the year at 1,327.27 points. This compares favourably with the gain of 1.29 per cent posted in 2011. The Financial Stock Index (FSI), which tracks the financial stocks on the exchange, managed to close at 1,039.86 points recording a gain of 20.48 per cent compared to a loss of 13.69 per cent in 2011. The figure 1 below shows the performance of the GSE-CI, FBI and FSI for 2012. Market Capitalisation rose by 20.95 per cent from GH�47,347.23 million in 2011 to a high of GH�57,264.22 million in 2012. This stemmed from the listing of the New Gold Exchange Traded Fund, the acquisition of The Trust Bank by Ecobank Ghana Ltd and the listing of additional shares by AGA, CAL, CPC, EBG, ETI, HFC, SCB, TLW and UTB coupled with strong price performance on the exchange. The petroleum sector continues to hold the lion�s share of the market capitalisation representing 61.06 per cent of the total market share. TLW, a member of the petroleum sector holds close to the 61.06 per cent of the total market capitalisation. The mining sector represents 26.09 per cent of the market capitalisation whilst financial sector makes up 9.73 per cent of the total capitalisation. This is followed by the food and beverages sector (1.70%), manufacturing (1.07%), trading and distribution (0.16), agro-processing (0.09%), pharmaceuticals (0.07%), publishing (0.01%) and ICT (0.01%). Figure 2 below shows the distribution of market capitalization of listed equities by sectors. The market in 2012 witnessed a drop in investor interest on the equity market compared to the same period the previous year. In 2012 a total of 193,921,757 shares changed hands, representing a drop of 25.84 per cent from the 261,489,159 shares traded in 2011. The drop in trading volume can be attributed to a lack of interest from investors mainly due to an abysmal performance of the exchange in 2011 and the prevailing high interest rate on the market which shifted investor attention to fixed income securities within the first half of 2012. Thirty-four out of the 37 equities listed on the exchange traded actively whilst three equities were not traded in the year. The financial sector emerged as the most actively traded sector on the exchange with a total of 164,754,619 shares traded which represented 75.42 per cent of overall shares traded on the exchange. The pharmaceutical sector was the second actively traded sector with 7.76 per cent share of traded equities. This was followed by the pretroleum sector (7.13%), trading and distribution sector (4.52%), food and beverage sector (2.69%), manufacturing sector (1.99%), agro-processing sector (0.28%), publishing sector (0.14%), mining sector (0.07%) and ICT sector (0.0024%). Figure 3 shows the breakdown of the volume traded by each sector. As was observed with total shares traded for 2012, the total value traded also saw a 59.81 per cent decline. Compared to GH�256,160,448.43 value traded in 2011 2012 recorded GH�102,953,099.96). When ranked by value traded, the financial sector traded the highest value of shares representing 69.06 per cent of the total value traded on the market in 2012. The food and beverages sector took the second position with 12.99 per cent of the value traded. This was followed by the Petroleum sector (9.81%), the manufacturing sector (2.53%), the pharmaceutical sector (2.33%), the trading and distribution sector (1.98%), agro-processing (1.04%), the mining sector (0.24%), the publishing sector (0.02%) and the ICT sector (0.0003%). Figure 4 provides the percentage of value traded by each sector. Performance of the market as measured by the return of the GSE-CI showed a market improvement of 23.81 per cent compared to the negative 3.10 per cent recorded at the close of 2011. At the close of the first quarter of 2012 the GSE-CI had posted a return of 8.03 per cent but continued to trade flat trade in a sideways trend from the second quarter to the third quarter. The index picked up steam in the fourth quarter to close the year at a gain of 23.81 per cent Of the 37 equities listed on the Ghana Stock Exchange 28 equities witnessed price changes. This was made up of 21 gainers and seven losers, whilst nine traded flat for the period under review. Of the top five gainers, GOIL emerged the highest gainer for the year 2012 with a gain of 93.75 per cent. GGBL followed with a price change of 71.24 per cent which was also reflected in the company�s fundamentals after it successfully did a right issue to raise GH�70 million for expansion and to reduce its trade and interest bearing debt. SPL came out of the woods with a strong 66.67 per cent gain, claiming the third spot of the top gainers. The bonus shares issued by SCB provided the springboard to propel the company�s shares to an annual gain of 51.72 per cent. This was followed by FML with a price change of 49.79 per cent for the year 2012. The other gainers were MLC (36.36%), CAL (35.71%), UNIL (28.31%), BOPP (27.27%), EGL (26.32%), TLW (22.74%), ETI (20.00%), UTB (18.75%), TOTAL (18.46%), CMLT (16.67%), GCB (13.51%), AGA (8.82%), AYRTN (5.88%), AADs (4.00%), GLD (2.48%) and SG-SSB (2.13%). The top five laggards were led by ALW, one of the shares which struggled to stay afloat on the exchange, and had 61.58 per cent of its value shaved off in 2012. The company has been struggling with competition from cheaper aluminium imports from China. PBC followed with a 28 per cent fall in its share price mainly from a shortfall in cocoa bean harvest for the recent harvesting season. PZC posted a return of negative 23.94% whilst TRANSOL and SIC lost 20 per cent and 15 per cent of their share value respectively. The other laggards were ACI (-12.50%) and EBG (-5.96%). The tables below show the top five gainers/losers Shareholders of Ecobank Ghana Ltd (EBG) passed a resolution at the beginning of the year to merge the bank with the Trust Bank Ltd (TTB). This was after ETI had acquired a controlling interest in TTB in 2011. The merger led to the rebranding of all TTB branches to EBG and the absorption of TTB staff as well. The merger of the two banks made EBG the biggest bank by asset base and significantly increased its market share. ETI announced in September it has appointed Mr. Thierry Tanoh as the Chief Executive Officer designate of the group effective July 16 2012. Mr. Tanoh has spent the last 18 years with the International Finance Corporation (IFC) and rose to the position of vice president for Africa, Latin America and the Caribbean. Mr. Tanoh replaces Mr. Ekpe the current group Chief Executive Officer effective January 1, 2013. ABSA capital, the corporate and investment banking division of ABSA Bank Ltd and affiliated with Barclays, has listed NewGold ETF on the Ghana Stock Exchange. The ETF will track the price of gold on the international market. The listing of the NewGold ETF is expected to help develop the investor market in Ghana by widening the choice of asset classes available to local investors. Following an approval by shareholders at its annual general meeting on April 25,2012, SCB issued 96,256,070 bonus ordinary shares of no par value which were distributed to shareholders in the ratio of five new shares for every one existing share held. The new issue brought the total number of shares outstanding for SCB to 115.51 million shares. Market demand for SCB shares increased after the announcement of the issue and resulted in the shares increasing until it closed the year at a gain of 51.72 per cent. The actions taken by the Bank of Ghana (BOG) in 2012 to halt the depreciation of the cedi and the stringent adherence to the bank�s foreign exchange directives by the financial institutions is expected to continue its stabilisation effect on the cedi in 2013. Inflationary pressures appeared to have eased slightly at the end of 2012 and analysts are optimistic that it will remain so this year. In line with the stability of the cedi and a reduction in inflationary pressures, the BOG may likely reduce the monetary policy rate thus putting a downward pressure on interest rates on fixed income securities. Outlook for the stock market in 2013 remains optimistic. The market anticipate a decline in interest rates on money market and other short-dated fixed income securities as low inflationary outlook supports investments in long-dated instruments including the stock market. This is expected to shift investor interest from money market securities to the equity market, thus giving a boost to the market. Full implementation of the three tier pension scheme is also expected to increase activities on the stock market as pension fund managers purchase securities for the Tier 2 and Tier 3 funds. The high demand by fund managers is therefore expected to drive the prices of stocks that are fundamentally strong up. Analysts therefore expect the stock market to put up a very strong performance in 2013. First BanC Financial Services Ltd/GB.