Casablanca SECasablanca SE slides yet financiers find reason to smile

At the close of 2008, most financial analysts and observers of the Casablanca Stock ExchangeCasablanca Stock Exchange (Bourse des Valeurs de CasablancaBourse des Valeurs de Casablanca, BVCBVC) agree that the market remains sheltered from the financial turmoil rocking global markets, with the national economy's fundamentals still strong. Thanks to its advantageous position at the crossroads between European and African markets, the BVCBVC, Africa's third-largest market, is a top performer in the region, with a capitalization that reached MAD600 billion ($69.2 billion) in 2007.

Officials are currently downplaying a bearish trend that began in October. In a statement Fathallah Berrada, president of the executive board of the bourse, gave assurances that there is no direct link between the global financial crisis and the current bearishness of the BVCBVC. Berrada pointed out that Moroccan businesses and the overall economic environment remain strong and healthy, claiming that the morose climate in market circles is unfounded, caused "80-90% by psychology" and not grounded in any real cause for doubt. Insiders have indeed predicted the downward trend, which Berrada called "a sign of vitality and maturity of the market," adding that it is very healthy for markets to correct themselves from time to time.

A similar assessment was voiced by Youssef Benkirane, president of the Professional Association of Bourse Businesses (Association Professionnelle des Societes de Bourses -- APSB), who attributed the trend to the psychological impact of the international financial crisis. International turbulence has had "no direct impact" on the Casablanca market, he said. Yet he did concede that investors cannot remain unaware of what is happening in the international markets. He continued, "There is a psychological contamination among investors, which is leading them to panic and start selling their stocks."

Rallying investors
Benkirane called upon investors to maintain their confidence in the national financial market, as well as in the more than 70 businesses being traded on the market, whose average profits were more than 20% higher in the first semester of 2008, compared to the same period in 2007. One reason for preserving investor confidence, he said, is that the national financial market "is not open to the exterior thanks to the current foreign exchange regulations," adding that "we do not have the problems of interbank liquidity that are going on abroad."

Abdellatif Jouahri, governor of Morocco's central bank, also publicly expressed his optimism for the future of the national financial market. In a declaration at the 32nd meeting of the Council of Arab Central Bank Governors and Issuing Institutes, held in Marrakech, he confirmed Morocco's prudence and indicated that authorities are closely following the evolution of this crisis to ward off any risks. In order to effectively insure the immunity of the Moroccan monetary system, Jouahri announced the creation of a watchdog unit charged with collecting and exchanging information with the large financial markets and global policymakers.

At a colloquium organized by a Moroccan parliamentary group, participants debated what is at stake in the market, as well as ways to reverse the downward trend. Participants agreed that exchange regulations and the stability of the Moroccan banking system will protect against all but a limited fallout on the Casablanca market. The risk did, however, spark a debate on possible new roles the bourse could play in the Moroccan economy and its integration in various development policies. The colloquium concluded by recommending several measures geared to restore medium and long-term stability to the market. One recommendation would isolate the bourse as a separate sector and not simply a transaction market, allowing it to better finance the economy through privatizations. Another would differentiate between speculation and savings in the medium and long-term so as to favor the shoring-up of reserves. Another recommendation would reinstate a former system of deductions for institutions.

Global financial crisis fallout
When asked about the repercussions of the international financial crisis on the Moroccan economy, Abderrahmane Ouali, consultant and university professor, responded: "What we may feel, although not immediately, will touch our real economy. In other words, our growth could be weakened and our levels of unemployment and inflation could rise." As for the impact on the Casablanca bourseCasablanca bourse, Ouali indicated that it is minimal, "since the bourse is still in embryonic stages." Ouali agreed that the downward trend was the result of a severe and brisk correction after several bearish sessions.

The severity of this correction is related to the over-valuation of certain key securities, especially in real estate (CGICGI, AddohaAddoha and AlliancesAlliances), cement, construction sector securities and leading banks. Markets similar to Casablanca have PERs of close to 20 times their profit. Ouali said, however, that the Moroccan bourse was dealing with, before the abrupt fall, a PER close to 29 times profit. PERs for some exceptional securities were 131.1 times profit for CGICGI, 72.3 times profit for AlliancesAlliances, 33.3 times profit for BMCE BankBMCE Bank and 25.3 times profit for AddohaAddoha. "This overestimation made the market less and less attractive and suddenly the volume of transactions began to fall inexorably, halving since August. With flagship securities so elevated, investors became harder to find and some turned over securities neglected until now," Ouali added.

In 2009, a series of measures will be implemented to insure a rigorous and transparent management of the Casablanca BourseCasablanca Bourse in conformity with international norms, like the implementation of the latest version of the New Trading System (NSC V900). In its 80 years of existence, the bourse has acquired the know-how and the capital necessary to respond to the aspirations of investors, gain their trust and contribute to Morocco's development.

© Executive 2008

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