West Africa Stocks Drop to 2012 Low

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.

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.”