Who owns the Moroccan Stock Market? 13% is owned by one entity

For this post, I applied techniques of web scraping and text mining.

In a well-functioning market (and in normal, rational times), the stock market is viewed as the thermometer of the economy. If the stock market is growing at a healthy pace, it is often assumed that the economy follows suit, in turn reflecting on macro-economic indicators, such as inflation and unemployment rates. Studying the stock market is thus a good way to understand the economy.

I have been curious about the stock market in Morocco for a while, and wanted to answer questions such as: Does it represent the economy? What is it the value of all companies in the market? Which sectors are most represented? Who invests in these companies?

So I took a deep breath, and ventured to look for the data. Perhaps naively, I thought I would find some neatly organized Excel with clear headers and clean data. After some intense googling, it turned out that organized data of publicly-owned companies was nowhere to be found. Luckily, the Casablanca Stock Exchange website has the data, although spread out across hundreds of tables, and within tens of web pages. I took another deep breath, and told myself this is my opportunity to learn proper web scraping! This post thus ensued, mostly thanks to parsing packages (xml2, rvest) and text mining packages (stringr) in R.

Insight #1: The Moroccan stock market represents a small fraction of the Moroccan ecomomy

Only 76 companies are publicly traded in the Casablanca Stock Exchange, Morocco’s stock market. The market capitalization of all companies in the Moroccan stock market is MAD 510 Billions, while the country’s GDP (by way of comparison) is MAD 1.2 Trillions. The fraction of the stock market value to GDP is around 42% (not a perfect indicator as those two things are separate, but useful nonetheless).

This makes sense, as the Moroccan economy is made up of a large number of private companies, in addition to a large informal sector.

Insight #2: The stock market is dominated by four companies whose valuation approaches 50% of the market‘s total value

The graph below shows the top 10 companies by market capitalization and what they represent as a share of the total market’s value.

You can see that the most valuable company, telecommunications giant Itissalat Al-Maghrib (also known as IAM) has a market cap that accounts for ~23% of the MAD 510 Bn. total value of the stock market. Three banks (Attijariwafa Bank, Banque Centrale Populaire and BMCE Bank) together account for ~27% of the stock market’s value.

So, IAM and the 3 banks have a ~50% share of the entire market’s value.

On the top 10, we also find cement makers LafargeHolcim and Ciments du Maroc, electricity producer TAQA Morocco, sugar producer COSUMAR, port operator SODEP, and petroleum company AFRIQUIA GAZ.

The following graph should therefore not come as a surprise: The top 10 companies account for 70% of the market, and the next 10 account for another ~16%. Meaning, the top 30 companies in the Casablanca Exchange Market account for ~85% of the entire market’s value. The smaller 40 publicly owned companies barely account for 4% of the market’s value.

By way of comparison, the top 10 companies in the S&P 500 (a list that includes Apple, Amazon, Google and Facebook) account for 25% of the S&P’s USD 23Trillion value. Even that is an unnusually high share for a competitive capitalist market, but you’ve all heard the debates about whether big US tech companies are monopolies that need to be broken up.

Insight #3: Most companies in the Moroccan stock market are owned by majority shareholders

As the graph below shows, on average, four shareholders own almost the entirety of Moroccan publicly-owned companies. Usually, the first shareholder (denoted below as “1” on the x-axis) is a holding company, often holding the majority stake in the company. The second shareholder is often a group of retail investors and the third and fourth shareholders are other entities, such as institutional funds or other holding companies. So, while retail investors do own some stake in the companies, they only own 22% on average.

The picture does not differ significantly when we break down the companies by size: No matter how large the company is by market capitalization, the story is the same: it will mostly be owned by a holding company which has more than 50% stake in the company, followed by retail investors (and not always!), and then other smaller holding companies.

Remember the most valuable company from above?

Telco company Itissalat Al Maghrib is owned mainly by SPT (an entity owned by the UAE’s Etisalat TelCo Company) and the Moroccan State (Etat). Retail investors, denoted as Divers Actionnaires own only 17% of the company.

Again, by way of comparison, the ownership of Apple is fragmented: Investment fund The Vanguard Group is the largest shareholder, with a 7% stake, followed by Berkshire Hathaway (5.6%) and BlackRock (4%). Note that all are institutional investors.

Insight #4: The top 3 investors own ~30% of the entire stock market

Below is a graph of the top 15 investors and their stake as a share of the total stock market value. The largest owners of telco IAM (SPT and Etat) own around 20% of the market, followed by AL MADA (majority owner of Attijariwafa Bank). As expected from the earlier analyses, these top 15 investors are mostly made up of holding companies, some insurance companies (RMA WATANYA, WAFA ASSURANCE), some pension funds (CIMR).

This graph is a bit misleading. AL MADA Group, the holding company in the third position in this graph, actually owns other holding companies present in this list. According to their website, AL MADA has stakes in the following companies:

• Owns OGM, the holding company that owns WAFA ASSURANCE
• Owns 50% of LAFARGE MAROC
• Owns ONA Contourage, the main stakeholder in AGMA Insurance
• Owns 50% of Nouvelles Sidérurgies Industrielles, the largest shareholder in steel company SONASID
• The list is probably non-exhaustive. That’s only what I could get my hands on.

So, if we do a little bit of re-arranging, the picture looks more like this:

Including the other companies that AL MADA owns makes it the largest single investor in the Moroccan stock market, owning at least 13% of its stake, that is, MAD 66 Billion. Important detail: AL MADA is owned largely by the Moroccan royal family.

Insight #5: Institutional investors, such as mutual funds, pension funds and insurance companies, are very small in value

The graph below shows the distribution of investor according to certain characteristics:

• The x-axis covers the average stake that the individual investor owns in the public companies
• The y-axis represents the number of companies where the investors own stock
• Each dot, colored, represents an investor
• The size of the dot represents the total capitalization that the investor owns through its stakes in all the companies that they invest in

The graph above confirms what we have been seeing so far: institutional investors, which tend to invest in multiple companies to hedge their risk, are very small in value, in a way that is worrisome. In contrast, the holding companies, which own a large stake in a small number of companies, tend to be bigger.

Why is this worrisome? Institutional investors invest in the stock market on behalf of millions of smaller investors. For example, pension funds invest on behalf of government workers, company employees, in order to ensure a safety net for when these people retire. It is thus crucial that they have a significant place in the stock market. Again, just to compare, in the US, institutional investors account for 70% of the stock market’s trading volume.

TL;DR: What does this all tell us?

1. The majority of the Moroccan economy is not on the stock market.
2. The Moroccan stock market is dominated (in value) by a handful of companies that are so large in value that they eclipse the rest of the stock market. This raises question about monopoly practices: how did these companies get so big? (In fact, the most valuable company, telco IAM, was found guilty of monopolistic practices in 2019 and fined by the State. Curiously, the State owns 30% of IAM. Thankfully, the money from the fine went to manage the fall-out from the COVID-19 situation).
3. The holding companies that control most of the public companies hold on to their stock: they largely do not sell.
4. One entity, AL MADA group, has stakes in many sectors and companies listed on the Casablanca Stock Exchange. In fact, AL MADA alone owns at least 13% of the market’s value. AL MADA also owns a large number of private companies in Morocco and elsewhere, so its value is much bigger than its stake in the stock market. AL MADA is owned by the royal family.
5. Institutional investors are scarce, and that’s worrisome. These investors ensure a safety net for the future (e.g., people’s retirements). A deeper question is why are they so small in value? Is it because they’d like to buy but cannot (because the holding companies are not trading their stock), or is it because they don’t have the money to trade?

Again, if you’ve read all the way to here, thank you! As always, would love to hear your feedback!