Interview: Younes Benjelloun
How does the development of the sector compare with that of other markets in the MENA region?
YOUNES BENJELLOUN: Morocco was initially able to make significant strides in the early 1990s. Over the course of a decade we were able to transition from being uncategorised to an emerging market on the MSCI Index. However, that was unfortunately followed by a demotion to frontier market status. Unfortunately, the perception remains that the CSE is an expensive market relative to the rest of the MENA region. However, beyond our price-to-earnings ratio it is important to realise that the country – unlike the rest of Africa – benefits from strong domestic institutional savings, thanks to large insurance companies and pension funds. However, our domestic fixed income market is fairly well developed, particularly for government bonds. Furthermore, while Moroccan individuals are not allowed to invest in foreign capital markets, institutions can allocate only a small fraction of their assets. These foreign exchange controls lead to a situation where almost all domestic savings are targeting the same domestic financial assets with much higher local demand than other MENA markets. Given the low offer of new investment opportunities and limited number of IPOs, pressure on prices is strong, leading to recurring higher valuations than MENA countries. Economic operators must focus on listing more companies every year.
What direction should the sector take to evolve?
BENJELLOUN: In terms of investors’ demand on the Moroccan stock market, it is important to note that, first, it never attracted significant volumes in “hot money”, as is usually the case in other emerging markets. This factor contributes to a more stable market. Second, if I mention the CSE, investors automatically think of IPOs and only consider entering the market on a very short-term basis. People invest in an IPO but quickly trade out a week or two later if the price has gone up. There is no real long-term investment strategy, which does not encourage the sustained growth of our exchange. However, it is not only investors that need to shift their thinking, companies also need to start looking at the exchange as an opportunity to raise funds. The current modus operandi of firms is to introduce what they consider to be a finished product, at which point it is almost too late. Executives and company owners need to understand that a correctly issued IPO can serve as the liquidity boost that propels expansion and development. This can provide mutually beneficial opportunities for companies and for the exchange, such as faster early- to mid-stage growth for companies and portfolio expansion for investors.
How can activity be stimulated on the CSE?
BENJELLOUN: New companies should enter the CSE, including state-owned enterprises. Indeed, there are a number of public actors who could completely change the reputation and the positioning of the Moroccan market on the international level. We need to encourage public companies to introduce small portions onto the exchange, as their entry could fundamentally alter the entire system. This type of activity could transform the CSE into a leading regional centre for stocks and thus make it a global reference for investors. My personal hope for the market over the next 10 years is to double the number of listed companies from 75 to 150 and ensure that players from every significant sector are represented on the market.
What is the current outlook of the CSE?
BENJELLOUN: The CSE aspires to be a major exchange in Africa, but achieving this will require a lot of work. Therefore, we need to find ways to attract the biggest African companies. Morocco already has strong links with many of the most important regional firms and our banks operate across West Africa. We must acknowledge these successes and find ways to convince these firms about their own interests in listing on the CSE.
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