Faced with the downturn in the economic situation, investors raised their return requirements vis-à-vis the equity market. According to a survey by Attijari global research, the risk premium stands at 7.5%, up 1.4 points compared to the previous score of October 2021. Its increase would make it possible to absorb any shocks. At the same time, the easing of inflationary pressures might ease it.
The average return required by investors – to position themselves on the stock market over a horizon of more than 5 years – comes out at 10%, according to a survey by Attijari global research. This requirement shows an average risk premium of 7.5%, a six-year high. The market risk premium increased by 1.4 points compared to the previous score of October 2021.
In the meantime, the situation has turned around with the war in Ukraine, the acceleration of inflation, growth revised downwards (less than 2% expected in 2022), a stock market down by more than 7% since the start of the year and upward pressure on the yield curve. Investors’ expectations have therefore increased to absorb any shocks.
This increase leads to a 22.6 point plunge in the investor confidence index, calculated by AGR, which fell from 67.4 points in October 2021 to 44.8 points in April. It tumbled by more than 23 points among institutional investors, local UCITS and benchmark players. The largest drop was recorded among individual investors (-29.9 points) while the index of foreign investors fell by 18.5 points.
“The rise in the risk premium is the result, first of all, of the deterioration in investors’ perception of the annual performance of listed companies as well as of internal demand, under the effect of inflationary pressures and the evolution of the international context.
In addition, the upward pressures on the yield curve imply a technical increase in the profitability requirements for assets with uncertain returns”, explain the analysts.
Institutions, UCITS and banks are the most demanding with a risk premium of 8.5% once morest 7.8% for foreign investors and 6.4% for benchmark players. Individuals require a premium of 6.1%. The reduction in inflationary pressures might improve investor confidence and ease the risk premium.
“The easing of inflationary pressures would have a positive impact on investors’ perception of the stock market. Under these conditions, the scenario of a structural rate hike in Morocco would be less credible, which would favor arbitrage towards equities. Also, the easing of inflationary tensions would allow, in our opinion, an upward revision of the growth forecasts of listed companies in 2023”, estimate the analysts.
Expectations of growth in the results of listed companies remain well oriented. BMCE Capital global research (BKGR) predicts an increase in activity, profits and dividends for a group of 40 companies (Scope 40) representing 90% of market capitalization. The research company anticipates an 8.9% improvement in profits to 28.9 billion dirhams in 2022.
The Banking, Oil & Gas, Electricity, Insurance and Utilities sectors will be the main drivers of this growth. In addition, it expects a 2.5% increase in dividends to 19.7 billion dirhams. As for the Masi, its underlying trend would be bullish.
“While the results of the investor confidence index point to a market decline over the next three months, we believe that the underlying trend for Masi, over a two-year horizon, remains bullish,” notes an analyst. ‘AGR.
“The solid fundamentals of large caps on the stock exchange and the lack of investment alternatives within the Moroccan financial market would always favor equities,” he maintains.
Franck Fagnon / ECO Inspirations
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