One of the promises of financial investments is to profitably roam through economic cycles.  However, on the West African stock market, BRVM, this may be an unfulfilled promise in 2022 with stocks losing value and earnings growing slower than inflation.

Friday, December 9, 2022, data shows that this year, the WAEMU stock market (BRVM) has been unable to protect its investors against the inflation pressuring economies worldwide. While the overall value of transactions reached a record level of XOF161 billion (US$258 million), the BRVM Composite has lost 4.4%  since January 2022. 

This represents a XOF250 billion drop in the valuation of the companies listed on the market. Apart from the valuation loss, the companies' net profit is not as strong as it was in 2021. The overall profit of the 26 companies that have already published their operating result for the first nine months of 2022, is XOF548.3 billion. This is up by 4% only compared to the performance recorded in the same period in 2021. 

With the main composite index declining by over 4% and net profits rising by 4% only on the BRVM, investors have found themselves in an unprofitable market due to inflation, which is rising (to 8.4% as of end-October 2022, according to central bank BCEAO).  

The evolution of the composite index hides some disparities, however. The value of eleven of the 45 listed companies was higher than average inflation but,  their performance is unlikely to be reflected in the dividends to be paid to shareholders. The remaining 34 either recorded value rising below average inflation or their valuation dropped altogether.  

In addition, on the BRVM’s bond compartment (government and corporate bonds) the overall value has risen substantially but yields on the primary market average 5.8% and can be lower on the secondary market. 

With the mixed performance of the BRVM, the stock market interconnection project carried out by several African stock markets is a real opportunity for WAEMU investors. One of the major opportunities in that regard in Nigeria whose composite index (the NGX All Share Index) has risen by over 14.4% and the local currency (the Naira) is depreciating while the CFA Franc is resisting the US Dollars.