BRVM: Equities

Headquartered in Abidjan, Côte d’Ivoire, the Bourse Régionale des Valeurs Mobilières (BRVM) serves the members of UEMOA (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo) whose currency, the CFA franc, is pegged to the euro. The BRVM is among the world’s most successful integrated regional exchanges, and is Africa’s sixth-largest securities exchange by market capitalisation, with its $12.39bn in equities representing 14% of UEMOA’s GDP in 2016.

Following the strong growth experienced in 2015 (+17.7%), the BRVM recorded a setback at the end of 2016, with drops of 3.87% to 292.17 and 9.79% to 261.95 for the two main indices, the BRVM-Composite and the BRVM-10, respectively.

However, the BRVM was awarded the title “Most Innovative Exchange in Africa” at the Ninth Investment Forum held in New York in September 2016, ahead of peers from Johannesburg and Lagos. It also recorded the best performance in Africa in terms of initial public offerings (IPOs) that year, taking the number of listed companies from 39 to 43. The four IPOs in 2016 were: Bank of Africa Mali on May 31, Société Ivoirienne de Banque on October 27, Coris Bank International Burkina Faso on December 23 and Sucrivoire on December 29. The BRVM has also been admitted to the MSCI Frontier Markets Index. Joining the index is an opportunity for the exchange to increase its visibility and attract investors.

Market Capitalisation

At the end of 2016 market capitalisation was up 2.75% to CFA7.706trn (€11.6bn), against CFA7.5trn (€11.3bn) in 2015. Following the same trend, the total value of trade reached CFA409bn (€613.5m), against CFA336bn (€504m) in 2015, a 21.8% increase.

BRVM is dominated by Senegalese telecoms operator Sonatel, which accounted for over 20% of total trade value in 2016, follow by Burkinabe telecoms provider Onatel and Ivorian bank Société Générale de Banque en Côte d’Ivoire. Looking at BRVM returns on a sector basis, agro-processing and distribution were the only ones recording growth at the end of 2016, with increases of 24.8% and 3.7%, respectively, compared to the previous year. The recovery of commodities prices on global markets was beneficial to the sector, reassuring investors.

Slowdown

As of July 2016 the BRVM-Composite had dropped under 300 points, with the fall mainly due to selling pressures on listed stocks. In fact, wavering investor interest on the BRVM market could largely be attributed to the unimpressive financials released by most listed equities in 2016. This dip in performance resulted in a negative market breadth for 2016. This situation is explained by the slowing growth of the majority of listed companies, emerging from four years of strong growth following the 2011 political crisis in Côte d’Ivoire.

Outlook

The BRVM appeared to have bottomed out in early 2018. As of January 25, the BRVM-Composite Index had dropped to 229.41 points, its lowest level since reaching 300 points.

The IMF forecasts stable but strong expansion in the UEMOA zone in the coming years, with a 6.6% projected growth rate for the region until 2020.

In addition, a series of strategic actions have been implemented by the BRVM‘s management, including incentives for large public companies (through future privatisations) and private companies to list on the BRVM (16 new IPOs are expected by 2020), and the opening of a mining market for 2018.

In the medium and short term, we are optimistic about the prospects of the equities market. In fact, we believe that the bearish market has brought the share prices of listed companies to an affordable level, with a low price-to-earnings ratio apparent in all sectors. The current low prices, combined with the publication of companies’ 2017 results, in our opinion offer a good entry point for investors.