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Morocco : Why Casablanca Stock Exchange is worried about 2021

By El Mehdi Berrada
Posted on Wednesday, 24 February 2021 11:13

Casablanca Stock Exchange © Alexandre Dupeyron for JA

Despite having managed to contain the losses of 2020, the Moroccan market is expecting further falls in the months to come.

Despite the pandemic, the Casablanca Stock Exchange has managed to contain the losses of 2020, losing only 7.2% over the whole financial year – less than in 2015 – thanks in part to a steady rise in prices at the end of the year.

This recovery, which began in November, continued until the beginning of February, with a 14% increase over the three months. However, a decline is beginning to be felt (-2% since the beginning of February), which does not surprise Ranya Gnaba, an analyst at the independent firm Alpha Mena. “The increase at the end of the year was, in our opinion, exaggerated, and therefore the correction observed was inevitable,” she told us.

This downward trend is making investors fear that 2021 will be the real crisis year. Thus profit-taking, which consists of selling a stock whose value has recently risen to ensure a minimum gain, is increasing on the Moroccan market.

Abdellatif Jouahri eagerly awaited

“The companies which ‘saved the market’ last year are those which should be watched at the moment because of the seller’s movement”, says an analyst of the Moroccan market. Since mid-January, the three stocks which have gone down in value the most are Attijariwafa Bank, by more than 340m dirhams (DH) (€31m), IAM Gold, by more than 280m DH, and Marsa Maroc, by 170m DH.

The three companies feature on the long list of enterprises whose stocks are losing value, alongside Eaux minérales d’Oulmès (-13.6% since 1 January) and Lydec (-11.5% since 1 January).

According to several sources, the selling movement is a common practice amongst foreign investors and a few portfolio managers looking for stocks that are performing well. Institutional investors are watching this from afar until the situation becomes clearer.

“It would take a positive development to reverse the downtrend of the MASI (Moroccan All Shares Indice)”, our contacts say, betting on the next speech of Abdellatif Jouahri, the governor of the central bank, expected on 23 March. He is expected to share his forecasts and outlook on the current situation.

Banks under surveillance

But according to Gnaba, investors fear that dividends will become scarcer as a result of the crisis, especially in the banking sector where shares serve as the main catalyst for action. “The dividend in this sector was globally maintained in 2020, despite recommendations from Bank Al-Maghrib which advocated to maintain equity,” she said.

Despite a still relatively good national situation, the banking sector is now being scrupulously monitored by investors who are particularly worried about the sub-Saharan activities of its various players. They expect that 2021 will be marked by a scarcity of bank dividends or at least ones offered at less generous rates.

Other observers fear that the Casablanca rating will be weakened by the flood of “profit-warning” expected between now and mid-March and also by the mixed results forecasted. This is despite the fact that the dividend announcements are, so far, reassuring.

Expected underperformance

For the moment, the Stock Exchange has issued five alerts for the year 2020 (Total Maroc, Afriquia Gaz, CTM, Involys and Maghreb Oxygène) but these have not had a big impact on the Masi. “These alerts were expected, the market had already integrated the bad results to come”, says an analyst who is more apprehensive about the announcements due to be released from the real estate, bank and the building and public works sectors.

“The underperformance of large capitalisations will fuel the decline of the MASI over the coming months,” said Gnaba. She believes that “the damage caused by 2020 will not be marginal and will be reflected on companies’ balance sheets.”

The same observation was made a few weeks ago by the teams of Bachir Tazi, head of CFG Bank Capital Markets. They anticipated an 18% decline in the stock value of CFG25 (the 25 most liquid stocks and which represent almost 90% of the global capitalisation), notably due to 2020’s high provisioning rates and the cost of risk.

However, BMCE Bank of Africa estimated that the decline was almost 19% for the last financial year, if all stocks are included. The entity headed by Fadoua Housni anticipated at the end of last year sharp declines for sectors such as the building materials industry, real estate and the oil sector.

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