moroccos capital markets : evolving opportunities
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MOROCCO’S CAPITAL MARKETS
EVOLVING OPPORTUNITIES
2 10/05/2016
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
THE MACRO OUTLOOK
4 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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
THE EQUITY STOCK MARKET SNAPSHOT
16 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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
LOCAL DEBT MARKET SNAPSHOT
22 10/05/2016
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 10/05/2016
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 10/05/2016
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
WHAT’S NEXT?
26 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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 10/05/2016
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
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