Morocco MASI Falls as Treasury Yields Rise

The broker’s analysis argues the recent 12% drop in the MASI between August and October was not driven by weaker corporate fundamentals. Combined earnings for listed companies rose 7.4% in the first half, while adjusted profits excluding one-offs climbed 14.2%. Instead, the market sold off as investors grew more cautious about state financing needs, liquidity and the path of long-term rates.

That distinction is important for investors because it suggests the correction was valuation-led rather than earnings-led. The MASI fell from 19,047 points on Aug. 27 to 16,749 on Oct. 8 even as corporate profitability improved, underscoring how quickly higher sovereign yields can compress price-to-earnings multiples in a market where government debt is the benchmark for low-risk returns.

The 10-year yield has already climbed about 45 basis points this year, from 3.15% in January to 3.60% in October, despite Bank Al-Maghrib keeping its policy rate unchanged at 2.25% since March 2025 and inflation staying subdued. CFG Bank Capital Markets says the gap between the central bank’s stance and long-term yields reflects investor concern over future funding pressures, not current inflation alone.

Those concerns are rooted in supply and liquidity. The report says the market is pricing in the possibility that Morocco will rely more heavily on the domestic market if external borrowing is delayed or becomes too expensive, increasing demand for local liquidity and lifting the yield required to absorb Treasury issuance. At the same time, banks have been issuing more negotiable certificates of deposit to fund themselves, drawing cash away from longer-duration sovereign paper and limiting the ability of institutional investors to take up Treasury supply on the same terms as before.

The macro backdrop is not entirely negative. Foreign-exchange reserves stood at about 516 billion dirhams at end-September, up 23% from a year earlier and enough to cover nearly six months of imports, which helps limit external risk. Inflation also remains relatively contained, with Bank Al-Maghrib projecting 0.7% in 2026 and 1.5% in 2027. But investors appear increasingly unwilling to anchor equity valuations solely to those current readings when they are also factoring in possible future inflation, energy costs and fiscal competition for domestic savings.

That is why CFG Bank Capital Markets says the stock market is effectively discounting a 10-year Treasury yield of 3.80%, even though the current market yield is closer to 3.60%. In its framework, that level implies a lower theoretical market earnings multiple of 17.6 times, versus 18.2 times at 3.60% and 19.3 times if yields fell to 3.30%. The broader implication is that every 20-basis-point move in sovereign yields now matters for equity multiples, especially in rate-sensitive sectors.

The bank-heavy composition of the Casablanca market means financials are central to any recovery. CFG Bank Capital Markets expects lenders to lead the next rebound once Treasury yields stabilize and funding conditions improve, arguing that banks have moved beyond exceptional trading gains and are returning to more traditional drivers such as net interest income, fees, deposit growth and loan expansion. For now, that thesis depends on sovereign borrowing costs plateauing rather than rising further.

The bullish case is that valuations are already below historical norms. The report says the MASI’s expected 2026 P/E is 17.6 times, below its roughly 20-times average for 2015-2025, and that several stocks still show upside in the 3.80% yield scenario. The bearish case is that another leg higher in Treasury yields, or a prolonged liquidity squeeze, could extend the derating even if corporate earnings remain resilient.