Presentation made for the AFSIC conference in London about the capital markets in Morocco and future evolutions

1. MOROCCO’S CAPITAL MARKETS
EVOLVING OPPORTUNITIES

2. 210/05/2016
BM : Banque Mondiale
BaM : Banque Al Maghrib
HCP : Haut Commissariat au Plan
World Economic Forum
KEY INDICATORS
 GDP nominal, 2014 [$ bn]
 Real GDP Growth 2015e (BaM)
 Real GDP Growth 2016e (BaM)
 Inflation 2016 (BaM)
 Unemployment rate 2015e (BaM)
 Sovereign Rating
 Fitch Rating
 S&P
110
4.2%
1%
0.6%
10.1%
Investment Grade
BBB- (stable)
BBB- (stable)
 Population, 2015 [m] (HCP)
 GDP (PPP) % of world output
 PIB / habitant, 2014 [USD]
 Urban population 2015 (HCP)
33.7
0.23%
3,291
60%
MOROCCO – COUNTRY PROFILE

3. THE MACRO OUTLOOK

4. 410/05/2016
Sources : Haut Commissariat au Plan, Ministère des Finances
 The agricultural sector represents around 12% of GDP and can be volatile depending on the rainfall season
(est -13.8% in 2016)
REAL GDP GROWTH
GDP Structure

5. 510/05/2016
Sources : Haut Commissariat au Plan, Ministère des Finances
 A resilient growth but less than hoped for
 The industry and services exhibit a growth of around 3% p.a. hit by the slow growth in Europe and a
decreasing local consumption.
NON AGRICULTURAL GROWTH

6. 610/05/2016
Sources : Haut Commissariat au Plan, BAM
 In the last 10 years inflation hasn’t exceeded 3.7%
 Inflation levels for 2014 and 2015 stood below 1%
INFLATION

7. 710/05/2016
Sources : Office des changes, figures in billion MAD
 The trade deficit narrowed thanks to falling oil prices and growing exports (aerospace, automotive)
 The automotive industry (Renault and its ecosystem) exceeded phosphate exports in 2015 reaching 4.8 billion USD
vs 4.4 billion for the latter.
 Trade coverage reached 69% in 2015 vs 52% in 2014
TRADE BALANCE

8. 810/05/2016
Sources : BAM
 After reaching a « living on the edge » 9.5% of GDP in 2012, the current acount deficit went down to 2.3% in
2015 and is estimated to reach 0.1% in 2016.
 Net reserves are back to a comfortable 7 months of imports
EXTERNAL BALANCE

9. 910/05/2016
Sources : Haut Commissariat au Plan, Ministère des Finances
 Budget deficit improved dramatically from 7.3% in 2012 to an expected 3.7% in 2016
BUDGET DEFICIT (% OF GDP)

10. 1010/05/2016
Sources : BAM, figures in billion MAD
 After 30% and 24% in 2006 and 2007, bank lending is growing less than nominal GDP
 The growth of non performing loans may explain part of this soft landing
 The central bank lowered the cost of money to help lending without much success so far.
BANK LENDING : A SOFT LANDING ?

11. 1110/05/2016
Sources : Ministère des Finances
 At 63% of GDP Government debt is relatively high but stabilising
 Hard currency debt is low and the country investment grade rating leaves room for more borrowing if
necessary
TREASURY DEBT : A RELATIVELY LOW EXTERNAL DEBT

12. 1210/05/2016
Sources : Doing Business 2016
 Morocco ranks 75th among
189 economies
 Just behind South Africa
and Tunisia (ranked 73rd and
74th respectively)
 Morocco stands among the
few countries making 4 or
more reforms since the last
study to improve its doing
business ranking
DOING BUSINESS : AN IMPROVING SITUATION

13. 1310/05/2016
Sources : WEF Global competitiveness Report 2015-2016
 A decent ranking (72nd over 140
countries) but room for improvement
 Morocco ranked 5th in the continent
 Morocco ranked 55th in the « Basic
requirements » segment but 92th in
« Innovation and sophistication factors »
 Morocco should improve in « higher
education and training » and in « Labor
market »
 Finally Morocco scores well in
« Institutions » and « Infrastructure »
GLOBAL COMPETITIVENESS : RIGHT IN THE MIDDLE OF THE PACK

14. 1410/05/2016
 Morocco has remarkably been able to stage a quick turnaround in its external deficit and budget deficit
 But this softened the growth picture that has been very much linked to local consumption
 The second engine of growth ie exports is slowly accelerating but this re equilibrium will take some
time
 The worldwide soft patch is not helping much especially Europe which is by far the biggest trade
partner of the Kingdom
 Inflation is low and indebtedness sustainable, mainly in local currency leaving space for more and
better impacting investments
THE MACRO OUTLOOK : THE BIG PICTURE

15. THE EQUITY STOCK MARKET SNAPSHOT

16. 1610/05/2016
 After a stellar performance between 2003 and 2008 with a flury of IPO’s, the stock market entered a bear market in the aftermath of
the financial market crisis
 Morocco has been downgraded to Frontier Markets by S&P due to the lack of liquidity in Nov 2014
 The market is trying to bounce back but headwinds have been strong.
MOROCCO’S STOCK MARKET : SHALLOW WATERS

17. 1710/05/2016
Sources : Bourse de Casablanca, figures in billion MAD
 Ever since 2007, liquidity decreased to reach its lowest point in 2013
 Liquidity improved a bit but is still low
A DECREASING LIQUIDITY LED TO A DOWNGRADE TO FM

18. 1810/05/2016
Sources : MSCI,Sogécapital Gestion
EXPENSIVE COMPARED TO FM BUT A DIVIDEND YIELD RELATIVELY ATTRACTIVE
 The market’s PE is relatively high however it shows a good dividend yield (comparable to its peers)
 Some stocks do represent good picks in light of the current market conditions specially in the small and mid cap
area

19. 1910/05/2016
Sources : Sogécapital Gestion
 16.1% of market cap
 Present in 11 African countries
 27% of revenues from outside Morocco
PLAYING THE AFRICAN GROWTH STORY THROUGH THE CASABLANCA STOCK EXCHANGE
 7.4% of market cap
 Present in 10 African countries
 39% of revenues from outside
Morocco (14.5% from Atlantic Bank )

20. 2010/05/2016
Sources : Sogécapital Gestion
 20.5% of market cap
 Present in 10 African countries
 40% of revenues from outside Morocco
(2015)
 8.3% of the market cap
 Present in 21 African countries
 49% of revenues from outside
Morocco (Bank Of Africa)
PLAYING THE AFRICAN GROWTH STORY THROUGH THE CASABLANCA STOCK EXCHANGE

21. LOCAL DEBT MARKET SNAPSHOT

22. 2210/05/2016
 Size of the local bond market is around 48 billion USD
 Maturities reach 30 years, with a market duration around 5.7 years
 An institutional market with banks, pension funds and fund management firms as the main actors
DEBT MARKET IN LOCAL CURRENCY : RELATIVELY DEEP AND EFFICIENT

23. 2310/05/2016
 Only one negative performance for the last 15 years
 2014 was a record year and 2016 is looking very solid
 But with a 10 year treasury bond yielding less than 3% we are reaching new lows and performance will be limited
from now on
DEBT MARKET IN LOCAL CURRENCY : THE BULL MARKET IS STILL GOING ON

24. 2410/05/2016
Sources : Maroclear, Sogécapital Gestion calculations, Billions MAD
 The credit market ie corporate and financial institutions bonds and bills has been growing rapidly to a sizable 20 billion
USD market
 44% of the outstanding debt regards the banking sector followed by government owned entities (guaranteed debt) 15%
and other financial companies (10%)
 The lack of liquidity, fair pricing and a couple of corporate defaults are calling for better standards of issuance and
transparency
CREDIT MARKET IN LOCAL CURRENCY: AN INTERESTING STORY

25. WHAT’S NEXT?

26. 2610/05/2016
Important new reforms are under way :
• Casablanca Finance City ranked 1st African Financial Center and 33rd worldwide by GFCI 2016
• Capital markets and insurance regulators are now independent authorities
• The central bank officially announced a planned gradual floating of the MAD (first by widening the
bid ask spreads)
• The Casablanca Stock Exchange has opened its capital to local institutional investors paving the way
for an industrial shareholder (all eyes on the LSE)
• Islamic banks should be starting operations before end of 2016
• New regulation to set up Real Estate funds has been enacted
CAPITAL MARKETS : NEW REFORMS UNDER WAY

27. 2710/05/2016
AGRICULTURE AUTOMOTIVE
 Launched in 2008, the « Plan Maroc Vert »
has helped the agriculture value added to
grow at 6.7% p.a. (2008-2014)
 Investments during the period 2015-2020
reached 660 million USD
 Exports of agricultural products aimed to
be doubled.
 Second producer of automobiles in Africa
with 227,000 vehicules in 2014
 Exports growth reached 27% p.a. in the
period 2009-2014
 PSA Peugeot next in line after Renault
 PSA project investment estimated at 570
million Euros
MINING
 Morocco has 75% of the world reserves
of phosphate
 OCP is investing 14 billion USD (2008-
2025) to push production from 20 to 50
million tons of rock phosphate and to
triple production of fertilizers aiming to
reach 40% of the world’s market share
INVESTMENTS OUTLOOK

28. 2810/05/2016
AEROSPACE RENEWABLE ENERGY
 Exports reached 750 million USD in 2014
(+12.8% pa 2008-2014) aiming to reach
1.6 billion USD in 2020 by attracting new
players (Bombardier in 2015 , Eaton…)
and investments (700 million USD)
 A 60 million USD fund named
« Aerofund » is being structured
 Morocco is aiming to reach 42% of its
electricity production from renewables.
 The solar production complex in
Ouarzazate « Noor I » (160 MW) is under
production soon to be followed by Noor 2
and 3 (200, 150 MW) for a 2 billion USD
investment
 Other solar projects are under way
 Wind energy is a 2000 MW project for an
investment of 3.5 billion USD
LNG
 A 4.5 billions USD investment planned by
2025 to boost LNG usage for electricity
production
INVESTMENTS OUTLOOK

29. 2910/05/2016
TELCOS LOGISTIC
 Mobile penetration rate is high at 127%
(2015)
 4G licences to boost data usage
 2.5 billion USD in new investments
planned by the telecom sector in the next
5 years
 The government is aiming to create 70
logistic platforms connected to ports and
highways
 A new regulatory framework
 An investment of 6 billion USD mostly by
the private sector
TOURISM
 The « Vision 2020 » targets 20 million
tourists by creating new beach resorts
 As of 2015, 61% of the 14 billion USD
investment plan has already been disbursed
 New niches like medical tourism have
appeared with an investment of 3 billion
USD by Tasweek from the UAE.
INVESTMENTS OUTLOOK

30. 3010/05/2016
HOW ALL THESE INVESTMENTS ARE GOING TO BE FINANCED?
• The banking sector will provide a big chunk of it but…
• Because of the size of the investments that will not be enough
• Capital markets (debt, equity and funds) will play a major role in financing
Morocco’s growth in the coming years
CAPITAL MARKETS : A BRIGHTER FUTURE