COTE D'IVOIRE: ABIDJAN-BASED REGIONAL

UNCLAS SECTION 01 OF 02 ABIDJAN 001113

SIPDIS

SIPDIS

TREASURY PASS TO SECURITIES AND EXCHANGE
COMMISSION

E.O. 12958: N/A
TAGS: ECON EFIN IV
SUBJECT: COTE D'IVOIRE: ABIDJAN-BASED REGIONAL
STOCK MARKETGROWS DESPITE IVORIAN POLITICAL
PROBLEMS



1. (U) Summary. The Abidjan-based regional stock market
(BRVM) recently hosted the EconChief to discuss the current
expansion of the bourse, its potential, limitations, and its
place in the evolution of the market economy in Francophone
West Africa. Reflecting the regional understanding that Cote
d'Ivoire remains vital to the zone's long term economic
importance, the BRVM is healthy and expanding despite Cote
d'Ivoire's persistent political problems. End Summary


2. (U) The Director of the Abidjan Office of the
Abidjan-based regional stock market (BRVM),Amadou Tiadiane
BAH, briefed the EconChief at BRVM HQ on the bourse's
expanding capitalization and its role as an anchor of the
regional financial network. While the West African
Francophone-region stocks and bonds market remains a
relatively modest player compared to its much larger brethren
in Lagos and Johannesburg, it is growing, expanding its
liquidity and attracting more international investors.

Some key BRVM statistics:

-Number of firms listed: 40
-Number of firms that are Ivorian: 36
-Total capitalization represented by non-Ivorian firms: over
50% (Senegalese telcon Sonatel and Togo-based regional
banking powerhouse Ecobank together comprise approximately
1/2 of total BRVM capitalization)
-Total capitalization of stock exchange, as of (Sept. 29,
'06): $5.86 billion (vs. $31.92 billion in the Lagos Stock
Exchange and $1.2 in Ghana's)
-YTD Growth of BRVM's Composite (Oct 2, '06): 31% (vs. 35%
on the Lagos Exchange and 4% on Ghana's)
-Total capitalization of the BRVM bond market: $569 million
-Number of brokers: 20 (9 in Cote d'Ivoire, 3 in Senegal, 3
in Benin)

History, Operation of the BRVM's Stocks and Bonds Bourses


3. (U) The BRVM, the world's first regional stock exchange,
was formed in 1998 under the auspices of the Francophone West
African Economic Monetary Union (UMOEA) and its regional
Central Bank (based in Cote d'Ivoire),the BCEAO. The BRVM
began with the 20 firms listed on the Ivorian-only exchange
that had been in existence for 20 years prior to the BRVM's
inception and has gradually added several firms from other
West African nations as well as a number of Ivorian
companies.


4. (U) The overrepresentation of Ivorian firms (in numbers,
not capitalization) vis-a-vis those listed from other UMOEA
countries is related in large measure to the weakness in
privatization in the region compared to Cote d'Ivoire. Cote
d'Ivoire's mid-1990s privatization push (spurred in part by
the 1994 CFA devaluation) created a natural pool for
companies eager for public investment, particularly since, by
Ivorian law, 20% of the shares of privatized firms must be
made available to the public, and insurance companies are
mandated to invest a percentage of their capital in the local
capital markets. Other Francophone West African countries,
by contrast, have lagged in privatization efforts.


5. (U) The BRVM's bond market remains limited in size. Both
private and national bonds can be floated, as can bonds from
the West African Development Bank (BOAD). Ivorian bonds are
backed by the country's substantial port receipts, while
investors demand that other nations' bonds be guaranteed with
assets, limiting the regional sovereign debt market. Debt
floated by Ivorian entities, public and private, dominates
the BRVM's debt market, comprising over 60% of the total.
(Note: Ivorian national bonds floated to pay WB arrears in
May and June of '06 were done so outside of BRVM channels and
are not included in this figure. End Note)


6. (U) Firms listed on the BRVM are scrutinized by the West
African Regional Securities and Exchange Commission, which
was created by and continues to be managed by UMOEA. Listed
firms are required to be audited, as are brokers.


7. (U) Trading is done electronically. Trading takes place
between 8:30am and 10:30am, with settlement being completed
by 11:15am. All trades must be done through brokers, who
electronically place buy and sell orders via a common
computer interface allowing all market participants to
instantly see the actions of the others. Buy and sell orders
with matching prices are automatically married during the
settlement period following the trading morning. BRVM HQ has

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a public viewing area to allow anyone to watch the trading as
it goes on. Daily volume varies greatly, as is frequently
seen in small, relatively illiquid markets.

Recent Expansion


8. (U) Ecobank, based in Lome but operating in 13 countries
in West and Central Africa, cross-listed its share on the
BRVM, Accra and Lagos stock exchanges on September 12. The
firm, with its $2.5 billion balance sheet, has added
substantial liquidity to BRVM, and overnight the
capitalization of the regional bourse nearly doubled.


9. (U) BRVM management attributes the exchange's steady,
positive performance to the inherent profit potential of the
listed firms as well as favorable tax treatment of investors.
As of June 30, 2006, of those firms listed on the BRVM stock
exchange that had paid dividends, the average annual dividend
was 10.22%. Dividends are taxed at a 10% rate, and no
capital gains taxes are levied. Bah estimated that between
20% and 30% of total investment into the BRVM comes from
foreign (mainly institutional) investors, and that this
figure is rising. There are no restrictions on foreign
ownership or investment in the BRVM.
Valle