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Feb. 17 (Bloomberg) -- Morocco’s stocks are laggards no more as the strongest rains in three decades help boost agricultural output in the only emerging-market nation where equities fell in 2009.
Morocco’s Madex Index has climbed 5.7 percent this year, beating benchmark measures in Brazil, Russia, India and China as rains lift farm production. The gauge trades at a 20 percent discount to stocks in the BRIC nations, according to price-to- earnings data compiled by Bloomberg, and may outperform this year as stronger wheat harvests boost Morocco’s economy, London- based Silk Invest said.
“We strongly believe in Morocco,” said Zin Bekkali, Silk’s chief executive officer, who manages $75 million in the Middle East and Africa and has invested in those markets for a decade. “Heavy rains have undoubtedly brought back some confidence in the performance of the economy in 2010.”
The outlook for farming, which employs almost half the nation’s workforce, is improving as concern that China will tighten lending and European nations will struggle to pay their debts drags down BRIC stocks. Morocco’s rainfall exceeded evaporation and absorption by the most in 30 years in the month through mid-October, according to the nation’s meteorology agency.
Investors are returning to Morocco after the Madex fell 6.6 percent last year, missing the rally that bolstered the BRICs. Brazil’s Bovespa index soared 83 percent, Russia’s Micex more than doubled, India’s Sensex jumped 81 percent and China’s Shanghai Composite Index surged 80 percent in 2009 as the world economy rebounded from its first recession since World War II.
‘Relatively Cheap’
The Madex’s decline last year dragged its price-to-earnings ratio based on reported profit to 17.4 in December, the lowest since at least October 2006, according to Bloomberg data. The measure trades for 19.4 times earnings, less than the 24.1 average for the BRICs, 21.2 times for the MSCI Emerging Markets Index of 22 developing nations, including Morocco, and 20.1 times for MSCI’s gauge of smaller, frontier markets. The Madex declined 0.2 percent to 8,947.03 today, while the MSCI Emerging Markets index gained 1.3 percent at 11:12 a.m. New York time.
“Moroccan shares are relatively very cheap, which makes them more attractive,” Bekkali said in a telephone interview.
Agriculture accounts for 15 percent of the country’s gross domestic product and is the main source of jobs for the nation’s 32 million people, according to the U.S. Department of Agriculture. Wheat is Morocco’s biggest crop.
Harvest Increases
The nation’s soft-wheat harvest more than doubled in the first seven months of the current crop year, climbing to 2.4 million metric tons from June 1 to Dec. 31, the crops office said in a report posted on its Web site last month. That’s 71 percent above the five-year average, according to the report.
Morocco’s economy probably grew 5 percent last year after expanding 5.6 percent in 2008, according to the Rabat, Morocco- based Statistics Bureau. While that would exceed the 2.1 percent expansion last year in developing countries, growth may slow to 4.1 percent in 2010, the statistics bureau said, less than the 6 percent estimated for developing nations, according to the International Monetary Fund in Washington.
Rising agricultural production, increasing consumer spending and a stable government make Morocco, a constitutional monarchy headed by King Mohammed VI, “an extremely attractive trade,” said Johan De Bruijn, who helps oversee $13 billion in emerging market equities at Arlington, Virginia-based Emerging Markets Management.
Relative Value
Companies including Maroc Telecom, the Rabat-based phone and internet company controlled by Vivendi SA, and Douja Promotion Groupe Addoha SA, the nation’s biggest publicly-traded real-estate firm based in Casablanca, are most likely to benefit from the agriculture boost as local consumption increases, Bekkali said.
For some investors, Morocco isn’t cheap enough. When the Madex is valued on analysts’ 2010 earnings estimates, it trades at 16.5 times projected profit, more than the average 14.6 times for the BRICs, according to data compiled by Bloomberg.
Moroccan stocks are more expensive than other markets in the region, including Egypt, that offer faster economic growth, said Nathalie Wallace at Boston-based Batterymarch Financial Management Inc. Egypt’s EGX 30 Index trades for 11.7 times analysts’ earnings estimates, according to data compiled by Bloomberg. Egypt’s government has said the economy may expand more than 5 percent in the fiscal year through June 2010.
‘Faster Growth’
“We don’t invest in Morocco because companies are too expensive,” said Wallace, who helps manage $6.5 billion in emerging markets. “In terms of valuations we prefer faster growth in the region of Africa and Middle East.”
Morocco’s economy is also benefitting from tourism and foreign investment.
Tourists visiting the nation rose 7 percent in the first 11 months of 2009 to 7.7 million, the tourism department said in December. Morocco may have attracted 8.7 million visitors last year and aims to increase that to 10 million this year, according to the department.
Morocco expects foreign direct investment to climb to $5 billion in 2010 after dropping to $3 billion in 2008, and $2.27 billion in the first nine months of 2009, Nizar Baraka, Minister Delegate to the Prime Minister in Charge of General and Economic Affairs, said on Nov. 23.
Foreign companies are moving to establish a foothold in Morocco. BNP Paribas, France’s largest bank, said last month that it’s starting a wealth management unit and TomTom NV, the world’s biggest maker of car navigation devices, said last week that it plans to start selling products in Morocco, citing the country’s “great potential.”
“Morocco is a country with real opportunities,” De Bruijn said.
By Tal Barak Harif
Morocco’s Madex Index has climbed 5.7 percent this year, beating benchmark measures in Brazil, Russia, India and China as rains lift farm production. The gauge trades at a 20 percent discount to stocks in the BRIC nations, according to price-to- earnings data compiled by Bloomberg, and may outperform this year as stronger wheat harvests boost Morocco’s economy, London- based Silk Invest said.
“We strongly believe in Morocco,” said Zin Bekkali, Silk’s chief executive officer, who manages $75 million in the Middle East and Africa and has invested in those markets for a decade. “Heavy rains have undoubtedly brought back some confidence in the performance of the economy in 2010.”
The outlook for farming, which employs almost half the nation’s workforce, is improving as concern that China will tighten lending and European nations will struggle to pay their debts drags down BRIC stocks. Morocco’s rainfall exceeded evaporation and absorption by the most in 30 years in the month through mid-October, according to the nation’s meteorology agency.
Investors are returning to Morocco after the Madex fell 6.6 percent last year, missing the rally that bolstered the BRICs. Brazil’s Bovespa index soared 83 percent, Russia’s Micex more than doubled, India’s Sensex jumped 81 percent and China’s Shanghai Composite Index surged 80 percent in 2009 as the world economy rebounded from its first recession since World War II.
‘Relatively Cheap’
The Madex’s decline last year dragged its price-to-earnings ratio based on reported profit to 17.4 in December, the lowest since at least October 2006, according to Bloomberg data. The measure trades for 19.4 times earnings, less than the 24.1 average for the BRICs, 21.2 times for the MSCI Emerging Markets Index of 22 developing nations, including Morocco, and 20.1 times for MSCI’s gauge of smaller, frontier markets. The Madex declined 0.2 percent to 8,947.03 today, while the MSCI Emerging Markets index gained 1.3 percent at 11:12 a.m. New York time.
“Moroccan shares are relatively very cheap, which makes them more attractive,” Bekkali said in a telephone interview.
Agriculture accounts for 15 percent of the country’s gross domestic product and is the main source of jobs for the nation’s 32 million people, according to the U.S. Department of Agriculture. Wheat is Morocco’s biggest crop.
Harvest Increases
The nation’s soft-wheat harvest more than doubled in the first seven months of the current crop year, climbing to 2.4 million metric tons from June 1 to Dec. 31, the crops office said in a report posted on its Web site last month. That’s 71 percent above the five-year average, according to the report.
Morocco’s economy probably grew 5 percent last year after expanding 5.6 percent in 2008, according to the Rabat, Morocco- based Statistics Bureau. While that would exceed the 2.1 percent expansion last year in developing countries, growth may slow to 4.1 percent in 2010, the statistics bureau said, less than the 6 percent estimated for developing nations, according to the International Monetary Fund in Washington.
Rising agricultural production, increasing consumer spending and a stable government make Morocco, a constitutional monarchy headed by King Mohammed VI, “an extremely attractive trade,” said Johan De Bruijn, who helps oversee $13 billion in emerging market equities at Arlington, Virginia-based Emerging Markets Management.
Relative Value
Companies including Maroc Telecom, the Rabat-based phone and internet company controlled by Vivendi SA, and Douja Promotion Groupe Addoha SA, the nation’s biggest publicly-traded real-estate firm based in Casablanca, are most likely to benefit from the agriculture boost as local consumption increases, Bekkali said.
For some investors, Morocco isn’t cheap enough. When the Madex is valued on analysts’ 2010 earnings estimates, it trades at 16.5 times projected profit, more than the average 14.6 times for the BRICs, according to data compiled by Bloomberg.
Moroccan stocks are more expensive than other markets in the region, including Egypt, that offer faster economic growth, said Nathalie Wallace at Boston-based Batterymarch Financial Management Inc. Egypt’s EGX 30 Index trades for 11.7 times analysts’ earnings estimates, according to data compiled by Bloomberg. Egypt’s government has said the economy may expand more than 5 percent in the fiscal year through June 2010.
‘Faster Growth’
“We don’t invest in Morocco because companies are too expensive,” said Wallace, who helps manage $6.5 billion in emerging markets. “In terms of valuations we prefer faster growth in the region of Africa and Middle East.”
Morocco’s economy is also benefitting from tourism and foreign investment.
Tourists visiting the nation rose 7 percent in the first 11 months of 2009 to 7.7 million, the tourism department said in December. Morocco may have attracted 8.7 million visitors last year and aims to increase that to 10 million this year, according to the department.
Morocco expects foreign direct investment to climb to $5 billion in 2010 after dropping to $3 billion in 2008, and $2.27 billion in the first nine months of 2009, Nizar Baraka, Minister Delegate to the Prime Minister in Charge of General and Economic Affairs, said on Nov. 23.
Foreign companies are moving to establish a foothold in Morocco. BNP Paribas, France’s largest bank, said last month that it’s starting a wealth management unit and TomTom NV, the world’s biggest maker of car navigation devices, said last week that it plans to start selling products in Morocco, citing the country’s “great potential.”
“Morocco is a country with real opportunities,” De Bruijn said.
By Tal Barak Harif