Can Côte d'Ivoire's stock exchange recover?

The Bourse Régionale des Valeurs Mobilières (BRVM) is the capital market of the UEMOA, which brings together Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo. The BRVM began operating in 1998 with 35 companies listed on its equity compartment. As of the end of 2018 there were 46 listed companies, including 35 Ivorian companies, and 40 bond lines made up of 26 for states of the economic union, 12 for regional organisations and two on behalf of the West African private sector.

Performance

The exchange was one of the best performing African stock exchanges in 2015 with a composite index of 17.7%. In 2017 the BRVM also positioned itself as one of the continent’s leading exchanges for sukuk (Islamic bond) listings. As a result of the significant evolution of its main indicators since 2012, the BRVM joined the Morgan Stanley Capital International Emerging Markets Index in 2016. The BRVM was not as dynamic in 2018, a trend that could also be seen among most of its African peers. The BRVM ended 2018 with a composite index of -29.14%. According to the exchange, the main causes of this underperformance were a rise in short-term US government bond rates, which made African equity markets less attractive for investment funds and caused gradual withdrawals; the revision of Article 410 of the Inter-African Conference on Insurance Markets code of ethics, which is more restrictive for insurance companies and slowed their intervention in the BRVM equity compartment; the weak stock market culture of individual investors, which does not encourage the implementation of best practices for stock market investments; the continuation of massive profit taking after several years of rising stock prices; the misinterpretation of the large securities fractionation operations carried out on the market since 2016; and the wait-and-see attitude of investors regarding regional bank stocks, following the effective implementation of the Basel II and III agreements with its corollary of increasing bank capital, and the impact of the SAF-Cacao liquidation case in July 2018, which impacted the level of provisioning of several banks.

Highs & Lows

Despite the change in scope after the introduction of the Oragroup parent company in the equity compartment in 2018, market capitalisation experienced a sharp contraction of 29% to CFA4.8trn ($8.2bn), compared to CFA6.8trn ($11.7bn) in 2017. The year 2018 also saw the strongest decline in transaction flows recorded by the equity market since 2012. The volume of securities traded fell by 45% to 117m, for a recorded envelope down by 24% – from CFA231bn ($397.1m) in 2017 to CFA174.4bn ($299.8m) in 2018. The capital exchanged was drained in half by two telecoms stocks: Senegal’s Sonatel at 34.6%, or CFA60.4bn ($103.8m), and Burkina Faso-based Onatel at 22.6%, or CFA39.4bn ($67.7m). Despite the difficult situation faced by the exchange in 2018, more than CFA110bn ($189.1m) was distributed in dividends by 33 of the 46 companies for FY 2017/18, compared to CFA101bn ($173.6m) the previous year, highlighting the strong fundamentals of the listed companies. The best performer was NEI-Ceda, the price of which more than quadrupled from CFA37 ($0.06) on December 29, 2017 to CF170 ($0.29) on December 31, 2018. Conversely, due to the 16% drop in palm oil prices and the 6% depreciation of the US dollar, PALM CI was the lowest performer, with a 65.4% decline in its stock price over the period.

Looking ahead, the equity market could experience an upturn. The BRVM is developing its activities by introducing new financial instruments and devices such as the online stock market, which will help reduce costs and increase accessibility. The exchange is looking to launch new funds such as diaspora bonds and project bonds, and is in the process of creating a market for raw materials, which should help improve its prospects in the short to medium term. Furthermore, the third compartment dedicated to small and medium-sized enterprises is set to return to an active phase, which should make the regional market more attractive.