West Africa Stocks Drop to 2012 Low

(Bloomberg) -- The optimism that drove gains in a benchmark West African stock index earlier this year has faded. Abidjan’s Bourse Regionale des Valeurs Mobiliere has tumbled almost 10% from its February high to languish at the lowest since December 2012.

West Africa Stocks Drop to 2012 Low

Much of the blame lies in the sluggish performance of index heavyweight Sonatel SA, said Kadi Fadika-Coulibaly, chief executive officer at brokerage Hudson & Cie in Ivory Coast’s economic capital. The wireless operator, which accounts for 40% of the benchmark, “is not growing as much as we expected it to,” she said in an interview.

The market, which covers seven Francophone countries plus Guinea-Bissau, has also been dragged lower by the region’s banks. Lenders account for almost a third of the gauge and have dropped about 20% this year, Fadika-Coulibaly said, in the face of stricter central bank regulations.

But, there is some upside for investors in easing valuations and more attractive price-earnings ratios, according to Fadika-Coulibaly. “Three years ago, the market was at 25 times PE, which in my view is expensive.” Index members now trade at less than seven times their estimated 12-month earnings. “It’s more realistic now.”

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