21 January 2009
The Casablanca Stock Exchange (CSE), the largest exchange in the Maghreb and West Africa regions and second in Africa after Johannesburg, has enjoyed steady growth for several years. However, in recent months, as the repercussions of the global economic slowdown have spread, the exchange's results have been unusually sluggish.
While trading on the CSE remained fairly consistent over most of 2008 - a crucial measure of a market's performance - the changing pool of market participants revealed a more challenging environment. The number of brokerage firms active on the CSE increased by just one last year, while the number of listed companies rose only slightly. The exchange finished 2008 with 16 brokerage firms and 77 listed securities, compared to 15 brokerage firms and 73 listed securities as of the end of 2007, with Integra Bourse being the only brokerage firm to start operations within the CSE in 2008.
The CSE also suffered a small loss of capital last year, with 2008 seeing a total market capitalisation of $66.3bn, compared to $76.02bn at the end of 2007. The downward trend continued into the first weeks of 2009. On January 8, the benchmark MASI (Moroccan All Shares Index) fell to below 10,000 points for the first time in more than a year, reaching its lowest point of 9,405.
Crucially, however, analysts are attributing the decline to psychological factors rather than to any real sign of weakness in the Moroccan market. Certainly, the Moroccan market has been largely buffered from the worst excesses of the sub-prime fallout, avoiding most of the roller-coaster ride seen elsewhere around the globe. Indeed, it was not until the third quarter that trading activity in the Moroccan capital markets sector began to slow, and even that was after a solid semester of strong growth.
Prior to the slowdown, 2008 saw five IPOs and share issues from a wide range of sectors, beginning with the small capitalisation of Delattre Levivier Maroc, a construction and related services firm. Label Vie followed, along with Delta Holding, La Compagnie Miniere de Touissit and Alliances Developpement Immobilier. As trading slowed however, a sixth scheduled IPO, from Trarem Afrique, was temporarily postponed pending market activity.
While the global slowdown will no doubt be felt in some of Morocco's key sectors, such as holiday real estate, the drop in the CSE should not be seen as a permanent trend, but rather as a self-correction.
"The downward trend of the market started in the third trimester as a simple self-correction after five straight years of positive growth," Sophia Hakam, an analyst for the CFG Group, told OBG. "As the global financial slowdown began to unfold, many investors became a bit more cautious, which led to a continued downward trend," she added.
Given the enormous growth the country's capital markets have recorded in recent years - tripling in volume between 2004 and 2007 - this correction on the market hides some positive upsides.
Younes Benjelloun, partner and board member of the CFG Group, told OBG that the market contraction would, for example, "relate to more foreign demand." Similarly, the stock exchange is now more representative of the country's economy than in years past, particularly in terms of sector distribution and size.
In a bid to stimulate trading, the Moroccan government has taken a series of measures to re-energise the markets. On December 4, the minister of economy and finance, Salaheddine Mezouar, unveiled a number of proposals designed to stabilise the market and encourage bullish activity, including one that will allow companies, under certain circumstances, to buy back their own shares without a minimum set price in the event their share price drops below a certain level
The minister also announced the possibility for insurance companies to hold up to 60% of their listed shares to cover their liabilities, as opposed to the previous ceiling 50%.
With the central bank predicting this year's GDP growth at 5-5.5% and inflation expected to drop from 3.9% to 2.9%, conventional wisdom says the kingdom will emerge relatively unscathed from the global financial turmoil. Certainly the growth predictions, though not as robust as years past, provide a sharp contrast to the plight of recession-bound economies elsewhere. If the drop in the CSE indeed proves to be a simple self-correction, the capital markets sector could once again see positive growth in 2009.
The Casablanca Stock Exchange (CSE), the largest exchange in the Maghreb and West Africa regions and second in Africa after Johannesburg, has enjoyed steady growth for several years. However, in recent months, as the repercussions of the global economic slowdown have spread, the exchange's results have been unusually sluggish.
While trading on the CSE remained fairly consistent over most of 2008 - a crucial measure of a market's performance - the changing pool of market participants revealed a more challenging environment. The number of brokerage firms active on the CSE increased by just one last year, while the number of listed companies rose only slightly. The exchange finished 2008 with 16 brokerage firms and 77 listed securities, compared to 15 brokerage firms and 73 listed securities as of the end of 2007, with Integra Bourse being the only brokerage firm to start operations within the CSE in 2008.
The CSE also suffered a small loss of capital last year, with 2008 seeing a total market capitalisation of $66.3bn, compared to $76.02bn at the end of 2007. The downward trend continued into the first weeks of 2009. On January 8, the benchmark MASI (Moroccan All Shares Index) fell to below 10,000 points for the first time in more than a year, reaching its lowest point of 9,405.
Crucially, however, analysts are attributing the decline to psychological factors rather than to any real sign of weakness in the Moroccan market. Certainly, the Moroccan market has been largely buffered from the worst excesses of the sub-prime fallout, avoiding most of the roller-coaster ride seen elsewhere around the globe. Indeed, it was not until the third quarter that trading activity in the Moroccan capital markets sector began to slow, and even that was after a solid semester of strong growth.
Prior to the slowdown, 2008 saw five IPOs and share issues from a wide range of sectors, beginning with the small capitalisation of Delattre Levivier Maroc, a construction and related services firm. Label Vie followed, along with Delta Holding, La Compagnie Miniere de Touissit and Alliances Developpement Immobilier. As trading slowed however, a sixth scheduled IPO, from Trarem Afrique, was temporarily postponed pending market activity.
While the global slowdown will no doubt be felt in some of Morocco's key sectors, such as holiday real estate, the drop in the CSE should not be seen as a permanent trend, but rather as a self-correction.
"The downward trend of the market started in the third trimester as a simple self-correction after five straight years of positive growth," Sophia Hakam, an analyst for the CFG Group, told OBG. "As the global financial slowdown began to unfold, many investors became a bit more cautious, which led to a continued downward trend," she added.
Given the enormous growth the country's capital markets have recorded in recent years - tripling in volume between 2004 and 2007 - this correction on the market hides some positive upsides.
Younes Benjelloun, partner and board member of the CFG Group, told OBG that the market contraction would, for example, "relate to more foreign demand." Similarly, the stock exchange is now more representative of the country's economy than in years past, particularly in terms of sector distribution and size.
In a bid to stimulate trading, the Moroccan government has taken a series of measures to re-energise the markets. On December 4, the minister of economy and finance, Salaheddine Mezouar, unveiled a number of proposals designed to stabilise the market and encourage bullish activity, including one that will allow companies, under certain circumstances, to buy back their own shares without a minimum set price in the event their share price drops below a certain level
The minister also announced the possibility for insurance companies to hold up to 60% of their listed shares to cover their liabilities, as opposed to the previous ceiling 50%.
With the central bank predicting this year's GDP growth at 5-5.5% and inflation expected to drop from 3.9% to 2.9%, conventional wisdom says the kingdom will emerge relatively unscathed from the global financial turmoil. Certainly the growth predictions, though not as robust as years past, provide a sharp contrast to the plight of recession-bound economies elsewhere. If the drop in the CSE indeed proves to be a simple self-correction, the capital markets sector could once again see positive growth in 2009.
© Oxford Business Group 2009
