Since the beginning of the year, the two main indices on the Casablanca bourse have fallen dramatically. At the beginning of July, the MASI index was about 11,500, down from almost 13,500 in the first half of January, a drop of almost 15 per cent. The MADEX fell from just under 11,000 to about 9,500 over the same period, equivalent to a 14 per cent drop.

The poor performance of the recent initial public offering (IPO) of STROC Industrie, an engineering and construction company involved in the construction of gas storage facilities, says much about the state of the market.

In late June, STROC made a 23 per cent share in the company available for trading through a capital increase of 288,515 shares, offered at MD357 ($45.49) each. It was the first IPO in Morocco this year and hopes were high among investors wanting to make a quick return on their purchase.

“The share price for IPOs on the Moroccan stock market generally goes up by 10-20 per cent when it launches, so people think that that will be their minimum gain,” says a trader on the Casablanca bourse.

The subscription period, due to run between 20-22 June, closed on 21 June, seven times oversubscribed. But hopes of quick profits on the shares soon proved misplaced. Trading opened on 30 June at MD279.75, but the price fell as low as MD330 on the first day of trading, before recovering to MD354.50 at market close. The price has gradually declined since, with the share trading at MD348 on 6 July.

“There is no interest in the share,” says the trader. “The big corporate share owners are waiting to see what happens with the price, but all the small physical owners are selling.”

The director of the Casablanca stock exchange has said that there will be a minimum of six IPOs on the exchange this year, but it is hard to see this happening, particular after STROC’s experience. “The first IPO was so catastrophic that I’d say this was rather optimistic,” says the trader.

The market is unlikely to pick up in the next few months. A referendum on 1 July returned an overwhelming vote in favour of constitutional changes that will see the government take on new executive powers from the king, and a programme of political reform is also planned.

But political change will be a slow process. Elections will be held in November, and only thereafter are the markets likely to react. “The Moroccan people have a lot of hope for the new constitution,” says Rachid Alami, a director at Upline Securities, a local brokerage service. “The day we have a new government, and a new prime minister who has a clear view of the next two, three, four years, there will be an upturn in the market.”