Morocco focuses its strategy on investing in the financial derivatives market

Morocco is entering a new phase of its stock market reform by trading financial derivatives in order to generate more revenue for the state and attract investors with less risk.  

Finance Minister Nadia Fettah has revealed that the Casablanca Stock Exchange is set to launch a derivatives market to trade equity futures as part of an effort to give the financial market a greater role in improving liquidity and financing the economy. 

Speaking at the African Investment Forum, which opened on Tuesday in Casablanca, the minister said the move follows a meeting of the Securities Market Committee, which includes the stock exchange regulator and the Central Bank, during which it was decided to transform the stock exchange into a holding company.  

In another move to develop stock exchange activity in the coming period, which will help the financial market move towards greater competitiveness among investors, Fettah explained that the stock exchange will also launch a clearing house. 

Under a memorandum of understanding to restore the chamber's capital, the stock exchange will hold an estimated 51% stake and credit institutions - banks - will hold the remaining percentage. 

The derivatives market, or what is known as the ‘futures market’, aims to promote the development of advanced financial products dedicated to trading in order to support investors and improve the financial infrastructure in the local market. 

Experts point out that this framework provides several opportunities to enhance investment diversification and improve financial stability in the country, which contributes to achieving the government's objectives of promoting financial market activity in accordance with the Investment Charter Law that was launched more than two years ago. 

Derivatives are financial contracts whose value is derived from the value of real or other financial assets, such as stocks, bonds, currencies, commodities or gold. 

These contracts have a fixed period of time, as well as a price and conditions that are established when the contract is drawn up between the seller and the buyer. 

For Fettah, the establishment of the derivatives market is based on solid fundamentals, represented by a stable economic equilibrium and a flexible financial sector.  

‘This comes as a culmination of legal and regulatory reforms aimed at improving transparency and financial stability, deepening the capital market and diversifying the financial instruments available to exporters and investors,’ he explained.  

Official estimates put the number of companies listed on the Casablanca Stock Exchange at 75 entities operating in various sectors, including banking, real estate, healthcare and others. 

At the end of 2022, the former chairman of the board of directors of the stock exchange, Kamal Mokdad, revealed that the Casablanca Stock Exchange aims to increase the number of listed companies fivefold, to 350 companies by 2035. 

Abderrahim Bouazza, director general of the Central Bank of Morocco, told the conference that ‘the derivatives market will start with futures contracts on stock indices’. ‘The derivatives market is part of the reform of financial instruments in the country,’ he added.    

According to data from the Moroccan Association of Capital Investors collected by Al-Arab, funding provided by investors over the past fifteen years has surpassed the 1 billion dollar mark for 250 companies operating in various sectors, of which more than 100 million dollars last year.   

Through the Investment Charter Project launched by Moroccan King Mohammed VI in February 2022, the government aims to increase the share of private investment by 33 billion dollars by 2035. 

Rabat is also banking on its sovereign Mohammed VI Investment Fund to stimulate capital investment activity after it launched sectoral funds this year that will be managed by companies and provide approximately two billion dollars in financing for investments until 2029. 

Nezha Hayat, chairman of the Moroccan Capital Market Authority, confirmed that the launch of the futures market project, which is part of the recommendations of the new development model, will allow for a new dynamism in the stock market. 

‘The derivatives market will play a more important role in the development of the economy due to the launch of large projects that require the mobilisation of additional funding, beyond traditional loans from banks and allocations allocated by the state and companies,’ he explained.  

This market will provide new innovative tools that will help hedge against risks, while developing the liquidity of spot tools, allowing to attract a larger number of investors and enhancing the presence of the Moroccan financial market at local, African and international levels. 

According to a study conducted by the Stock Exchange with the World Bank's International Finance Corporation, the listing of government companies has a positive impact in terms of improving governance and reducing dependence on the state for financing, while improving the efficiency of their business, thus contributing to growth.