Business
West African Stocks That Have Great Potential In 2014
Africa’s frontier stock markets spoiled investors in 2013. Ten African share indexes posted returns of 25 percent or more during the year. And four gained more than 40 percent. It’s not too tough to look like a genius stock picker in an environment like that. You could have pretty much picked a ticker symbol out of a hat and had a reasonably good chance of watching it rise 20 percent.
Unfortunately, it looks like 2014 will be much rougher. Through February, nine sub-Saharan markets were in the red in U.S. dollar terms. This is due to a number of internal and external factors. The Fed’s tapering of quantitative easing pulled the rug out from under emerging market currencies. China’s slowing economic growth has commodity investors worried. And political moves like the firing of Nigeria’s well-regarded central bank governor have investors questioning the direction of the continent’s governance.
But, in spite of the gloomy near-term outlook, there are some breaks in the clouds; some African markets with potential in 2014 for outstanding returns. One such market, I believe, is the Bourse Régionale des Valeurs Mobilières (BRVM), Francophone West Africa’s regional stock exchange.
Banking on Cote d’Ivoire’s Recovery
Cote d’Ivoire, the home of the majority of the BRVM’s listings, is recovering steadily from civil war. The International Monetary Fund forecasts economic growth of 8 percent this year, thanks in part to a big infrastructure development program.
There’s a new road linking the port city of Abidjan to Yamoussoukro — the political capital — which should help foster both economic growth and a sense of national unity between north and south. And a badly needed third bridge across the Abidjan lagoon is under construction, which its builders claim, when finished, will add 1 percent to the nation’s annual gross domestic product growth. Moreover, cocoa prices are set to rise this year, and Cote d’Ivoire is the world’s biggest cocoa producer.
Stocks to Watch on the BRVM
In response to all of these encouraging developments, the BRVM’s main index climbed 45 percent in U.S. dollar terms in 2013, and it’s already up about 4 perent so far in 2014. In spite of this big jump, however, the major stocks on the exchange still average dividend yields more than 5 percent. So, which stock offer the most compelling opportunities? Here are a few that I believe merit a close look.
Bank of Africa – Cote d’Ivoire
This affiliate of Morocco’s BMCE Bank is one of Cote d’Ivoire’s fastest-growing banks. It has a network of 22 branches and plans to open seven more within the year. It’s traditionally been a retail-oriented bank, but it would like to expand its corporate lending, and to that end it has plans to open a business center in downtown Abidjan this year.
