Greater access to finance in Morocco

Until recently, investment opportunities on the Casablanca Stock Exchange (CSE) were limited to securities on the equity and bond markets, both of which were dominated by major Moroccan corporates, or investing in mutual funds based on such securities. However this is set to change, with the CSE and market authorities working in recent years on the launch of a wide range of new products, services and exchanges.

Small Listings

Prominent among these are a new board listing small and medium-sized enterprises (SMEs), which will be created by the new stock exchange law currently being worked on by the government (see overview). The London Stock Exchange Group (LSEG) will help to design the new board as part of its strategic partnership with the CSE signed in June, in addition to providing other forms of support.

“LSEG operates a programme in the UK and Italy to provide training and support to SMEs to prepare them for listings, and we are working on the implementation of a similar programme here,” Badr Benyoussef, chief business development officer at the CSE, told OBG. In November 2014 the CSE’s chief executive Karim Hajji said he hoped the exchange would be operational by the end of 2015. In June of that year he told local media that the exchange was dependent on the promulgation of the new stock market law.

Solving Liquidity

Some industry figures say that wider issues in the market will need to be addressed in order for the new exchange to function well. “The SME board is a good idea, as increasing the availability of financing for SMEs is important for the national economy, but it will not work unless the liquidity problem in the wider market is resolved,” Karim Gharbi, director of research for capital markets at Moroccan investment bank Casablanca Finance Group, told OBG.

Fortunately, improvements in the market’s liquidity situation are on the horizon, thanks both to the positive current outlook for the economy as a whole in 2015 as well work under way to launch other new products and services. “We hope that the launch of these new products will help to resolve the market’s liquidity problems,” said Benyoussef, adding that he believed that having a diverse product offering overall would help more than the launch of any individual product.

Securities Lending

Among these new facilities is the ability for investors to lend and borrow securities, which among other things effectively allows for short- selling to take place, which was legalised by a law published in the official journal in February 2013.

“Securities lending will allow for the market to function in periods when it is falling as well as rising, which was previously not the case,” said Benyoussef, explaining how the innovation will help to boost transaction volumes. “The market is also currently dominated by institutional investors who have long-term investment horizons; however the possibility of short-selling should help to attract other types of investors,” he added.

Following a range of implementing regulations issued over the course of a year and a half following the law’s publication, it entered into full effect in late 2014. “The law is now completely operational from a regulatory point of view,” Benyoussef told OBG, speaking in February 2015, though he added that it was too early to judge its impact. Local market actors, however, have criticised some aspects of the law, including what they see as a lack of focus on issues relating to collateral, and as of February the law was in the process of being amended by the Ministry of Economy and Finance.

Futures

May 2014 also saw parliament’s approval of a law establishing a futures market; however a number of additional regulatory steps need to be taken before the exchange can be launched. These include the creation of a clearing house; the central bank Bank al Maghrib is in the process of seeking an external service provider to operate the institution.

Hicham Elalamy, the deputy director-general of the Conseil Déontologique des Valeurs Mobilières, told OBG that there was no specific timetable for the market’s launch, but that installing trading and information systems would take at least 18 months to accomplish.

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The Report: Morocco 2015

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