Investors in the equity and bond markets reacted weakly to keeping the key rate unchanged at 1.50%, according to two local experts who give us their explanations. To analyse.
The announcement of the Central Bank’s decision regarding the change in the key rate did not really generate a reaction from investors on the equity and bond markets.
This announcement was highly anticipated. The stock market had even experienced an acceleration of the decline, linked to the fears of some investors in relation to a possible increase in the key rate.
The key rate was finally kept unchanged at 1.50%, following the Board meeting of Bank Al-Maghrib, held on Tuesday, June 21.
Investors fearing a rise, the stabilization of the rate should have made them react positively. But that’s not really the case.
Joined by LeBoursier, two market experts tell us that, for the moment, the reaction of investors remains very weak on the markets analyzed.
Arbitrage in favor of the secondary market
A manager in a research company gives us his analysis. “Some investors were expecting a rate hike. We (research company, editor’s note) and our colleagues, on the basis of objective elements, have pointed out that in principle the Central Bank should maintain the key rate at its level. The stock market should have recovered a little after keeping the key rate unchanged. But stock market investors did not really react positively to this announcement. »
Investors’ weak reaction can be explained by the fact that a rise in rates on the secondary market has been observed, indicating that an arbitrage has been made in favor of this market.
“The tensions are very visible on the secondary market. Investors are now arbitrating on the secondary part. If the key rate had increased, this would have caused a sharp drop in the equity market. But as the rate has remained stable, and even the speech of the wali of BAM does not announce a possible rise in the rate in the months to come, which somewhat closes the door to any speculation; investors prefer to focus on the secondary market”, explains our interlocutor.
The rise in trading volumes seen this week is largely attributed to round-trip trading that lightly enlivens the market at the end of each semester, according to our interviewee. “Otherwise the volumes would have been very low because there are no fundamental elements that could boost the market,” he underlines.
Slight buoyancy in the primary market
The reaction of investors could have been significant on the bond market in the event of a rise in the rate. “The decision to maintain the rate was widely anticipated. So it was overall integrated in the curve », tells us a local fund manager.
In contrast, a slight dynamism is noticed on the primary market. “We are seeing a little animation on the primary market. This is because there are a few investors who were afraid of a rate hike. They have refrained from making submissions for the past few weeks. When the raise was not made, they were reassured, which encouraged them to carry out their bids. The last auction session on this market recorded 5 billion dirhams of subscription, whereas they usually revolve around 3 to 3.5 billion dirhams. But I emphasize that this dynamism remains very slight. We have to wait a bit before confirming this trend,” he concludes.