Interview: Souad Benbachir
How can regulatory reforms galvanise the market?
SOUAD BENBACHIR: Capital market regulation is becoming more flexible and autonomous. The Moroccan Capital Markets Authority and the Casablanca Stock Exchange (CSE) now have more authority to adapt to the economic situation. In addition, the introduction of real estate investment trusts (REITs) will bring a new class of assets to the market and new boards to operate with qualified investors. This will allow for the listing of projects that require the evaluation of technical aspects, such as infrastructure and hospitality. These types of projects do not generally attract interest from a large number of investors, but are attractive for qualified investors. Issuers who have projects that are difficult to promote to the general public will now have a space in which to raise liquidity, along with many other advantages. Beyond the reform of the regulatory framework, it is also important to create different spaces for financing, and the development of a market dedicated to small and medium-sized enterprises (SMEs) is promising. The ELITE programme plays an important role in raising awareness of how SMEs can be supported and upgraded, while the SME board will allow companies to operate in a more efficient manner. Thus, we are starting to have an efficient business market in Morocco, within which there are – for any type of business – educational tools and financing tools, as well as a path to go from one to the other. The financial communication of SMEs must now be strengthened to make the dissemination of their balance sheets more flexible, which would give them more confidence.
Moreover, there is also a need to strengthen access to finance for businesses. For instance, the Crowdfunding Law provides SMEs with an additional funding tool. The more the country manages to coherently finance businesses in different ways in order to meet different needs, the more dynamic the economy will be. Consequently, there is better regulation in place and a general confidence has been restored among market players, in particular thanks to the commission set up by King Mohammed VI to establish a new development model for the country. Privatisation is also expected, as well as the movement of pension funds towards the equity market. Pension funds are growing due to the expansion of the middle class, with the number of subscribers to retirement savings programmes increasing. This has supported greater liquidity in 2019, and this is expected to continue in 2020.
What can be done to boost transactions on the CSE?
BENBACHIR: All capital markets players must play their role. This includes the state, which should continue to issue more public enterprise shares. It is also necessary to expand communication about the success stories of companies listing on the CSE. Knowing about the performance of these firms would generate more interest from companies looking for solutions to finance their growth. In addition, the multiplication of markets on the CSE, which are in the process of being set up, will allow all investors to have arbitrage mechanisms, and this will thereby create greater liquidity. The real need now is to establish a futures market that will provide secure transactions for investors.
REITs will also significantly change both the capital markets and real estate sectors and generate a lot of transactions. This will enable the professionalisation of the management of REIT products, which will significantly expand the number of interested investors and give greater depth to the market. Allowing the listing of REITs is an additional step, as it attracts individuals who want to be exposed to real estate without the hassle of property management. This solution will be brought about as the fund will be managed by dedicated professionals. Furthermore, REITs provide a new class of savings asset that offers a rate of return of between 5% and 7%. It will now be necessary to educate the market so that REITs contribute to the financialisation of the economy and to the disintermediation of savings.
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