Moroccan stocks seen lower as downturn takes hold
By Tom Pfeiffer
RABAT, April 28 (Reuters) - Optimism over a record grain harvest has prompted a mini-rally on Morocco's bourse in recent months, but analysts are forecasting stocks will decline for the rest of 2009 as the impact of a slowing world economy sinks in.
The expected rise in farm yields is likely to underpin consumer spending in the north African kingdom, where farming is the chief source of employment and accounts for up to a fifth of gross domestic product.
Investors say there is still widespread uncertainty over the effect on company profits from falling tourism, a drop in demand from export customers in recession-hit Europe and a slowdown in foreign investment and remittances from Moroccans living abroad.
Morocco's non-farm economy grew an estimated 1.3 percent in the first quarter, the slowest rate since 2002, the state High Planning Commission said on Monday.
"A lot of Moroccan companies will be hit by the crisis and some people are being too optimistic," said a Casablanca financial analyst who asked not to be named.
He forecast the benchmark MASI index would fall by as much as 20 percent in 2009. After a sharp drop in January, the index has risen 17 percent from its low that month and is now little changed from its 2008 close.
The Casablanca bourse surged until last year as reforms strengthened Moroccan banks, pushing down interest rates and pulling more money into the financial system.
Those banks suffered little immediate contagion from the global financial crisis as restrictions on the movement of capital meant they had little direct exposure to world markets.
In 2008 stock indexes in Dubai and Cairo tumbled 72 percent and 56 percent respectively. Casablanca slipped only 13 percent.
Credit growth is slowing in Morocco but remains strong as lenders reach out to new customers in a country where only a minority of the population has a bank account.
Analysts say Moroccan stocks are relatively expensive compared to Egypt, north Africa's biggest financial market. Shares of Casablanca-listed firms trade at around 16-18 times estimated 2009 earnings, compared to 8-9 times for Cairo.
"GDP growth overall should be fairly high but I am concerned about some of the important drivers of the Moroccan economy of the past five years," said Simon Kitchen, senior economist at investment bank EFG-Hermes.
"Before long we'll see a more pronounced effect on many sectors of the economy," said a Credit du Maroc Capital analyst who asked not to be identified. "We're already seeing a growing effect on companies in sectors reliant on European economies."
The analyst said Moroccan stocks were likely to decline for the rest of the year in below-average trading volume.
The uncertain outlook has discouraged any Moroccan companies from listing in Casablanca this year, though bourse officials predict some IPOs before year-end. Five firms listed in 2008.
Analysts said the underlying picture for many Moroccan companies remained positive as consumer spending is propped up by low interest rates and farm incomes grow.
That should underpin profits of telecom firms like Maroc Telecom (IAM.CS), food companies such as Cosumar (CSMR.CS) and utility Lydec (LYD.CS), said the Credit du Maroc analyst.
Analysts are also favouring property firms like Addoha (ADH.CS) that have sought to shift their exposure from luxury second-home developments hit by the global economic downturn towards state-backed low-income housing projects.
The low interest rates make stocks relatively attractive compared to debt. Moroccan five-year treasury bonds were yielding 3.67 percent last week, far below the implied dividend yield for Maroc Telecom of 5.6 percent. (Editing by Rupert Winchester)
