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Sluggish Casablanca Stock Exchange Gets a Boost from Maroc Telecom

There is optimism in the Casablanca Stock Exchange. The activity in the North African bourse appears to be picking up. Although the amount and value of the transactions have been on the rise, the source of such activity indicates that the Bourse remains heavily reliant on the performance of a few companies and the joy is not spread among all the listed stocks.

The volume of transactions in the Casablanca Stock Exchange (CSE) has more than doubled this year thus far. By April 2005 year to date, the value of the exchange's transactions grew to MAD 28.2 billion, up from MAD 13.57 billion the same period last year.

But where did this doubling of transactions come from? Apparently, one particular company accounted for a great share of the growth. Telecommunications firm Maroc Telecom (MT) alone amounted to a massive 35% of January to April 2005's capitalization. MT's capitalization for that period was MAD 2.151 billion in a market valued at MAD 6.204 billion.

Although MT was the leading player by far, there were few other companies that did well in the ranking and in overall value. Financial group BMCE accounted for 12.69 % of market capitalization. Among the most top 10 liquid value, industrial conglomerate ONA and Attijariwafa Bank accounted for 6.58% and 5.54% of market cap, respectively, followed by the BCP Bank at 3.71%, Sonasid at 3.51%, Samir, Lafarge and Holcim at less than 3% each.

When removing MT, which is now a subsidiary of the French company Vivendi Universal, the CSE's performance remains generally weak. MT appears to be the outlier that brought the CSE into positive territory.

MT's role in waking up the sleepy stock exchange has been crucial. With its introduction in the Bourse, the CSE has been able to attract an unusual number of foreign investors seeking real value. But for the stock exchange authorities, MT alone is not enough. Now that there is some positive momentum, they need to implement innovative ideas to maintain this momentum and make their Exchange a place where companies really raise the money they need, and a place where investors grow their assets and wealth. To keep this momentum going, new introductions into the CSE are required. New introductions should focus on companies with serious potential and with the ability to attract world-class investors who will be convinced that an investment in them will bring them healthy returns, in fact better returns than anywhere else in the world.

This is hard to achieve but it is achievable with smart policies and good incentives. A number of companies in Morocco are currently potential candidates for a public offering. They have different core activities, scopes and financial profiles and they also represent the hope of what can become a more economically relevant and less symbolic stock exchange.

In chronological order, there is the expectation of an agribusiness firm to enter the Bourse this month of June 2005. The manufacturer of industrial gases, Afriquia Gaz, which is already listed in the CSE, has also announced that it plans to raise more money by floating more shares in the exchange. Afriquia Gaz needs money to lessen its debt following its acquisition of rival Primagaz. The capitalization increase is expected to be launched in July this year.

These two announcements will likely amount to small operations and will not be equal to what MT provided and generated. But, there is a lot of talk about two potentially large IPOs involving the utility firm Lydec (Lyonnaise des Eaux de Casablanca), and RISMA, the investment fund owned and managed by the French hotel and hospitality group Accor. Some sources say that Lydec may even increase its capitalization through listing as early as July.

In the case of Risma , its owners are eyeing the end of 2005 for an entry into the CSE, but its management has until October 2006 to have the company listed.

While these planned introductions are all the buzz in Casablanca, there were expectations of an introduction of 20% of Altadis, the Spanish-French cigarette maker, which purchased Morocco's tobacco firm Regie des Tabacs. The plan appears to have been scrapped. Sources say that finance minister Oualalou, after having sold 80% of state-owned Regie des Tabacs to Altadis for MAD 1.5 billion, decided to sell it the remaining 20% instead of a stock exchange floatation, as initially promised. While many in Morocco disagreed with the sale, the decision to do so was motivated by the government's need for money to offset the losses that came from the drought and the increase in the petroleum prices, which have weakened Morocco's finances.

While the decision to sell to Altadis the remaining 20% instead of floating them on the Bourse is not final, there is a possibility it will occur soon. Such decision would send a mix signal to the market as to the authorities commitment to facilitate the establishment of a healthy stock exchange.

© The North Africa Journal 2005