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