The Casablanca Stock Exchange's benchmark MASI index has entered a consolidation phase after three consecutive weeks of decline, yet the pullback remains contained at slightly above 2% since August 24. Closing Friday at 18,615.24 points, the index shows an annual underperformance limited to just 1.23%.

A Modest Correction Despite Multiple Support Factors

While the market has retreated from recent highs, several supportive elements remain intact. Half-year earnings reports are beginning to arrive, profit expectations remain constructive, trading volumes are recovering, and valuations have eased from stretched levels. However, external conditions have deteriorated rapidly, with Brent crude now trading around $107 per barrel and the Federal Reserve poised to raise rates this Wednesday, followed by Bank Al-Maghrib's policy meeting on September 22.

The week ending September 11 saw the MASI decline 0.94%, following a 0.73% drop the previous week and a slight pullback in late August. The MASI 20 underperformed with a 1.66% weekly loss. Despite three consecutive negative weeks, the magnitude of the decline suggests consolidation rather than capitulation.

Market breadth tells a more nuanced story. The MASI Mid & Small Cap index actually gained 0.22% last week, while several sectors significantly outperformed. Real estate investment trusts surged 7.62% and pharmaceuticals climbed 6.88%, contrasting sharply with the 3.21% decline in construction and building materials.

Technical Picture Remains Constructive

From a technical standpoint, the MASI maintains position above key short-term support levels. Initial support lies in the 18,300-18,400 zone, with stronger backing at 18,200-18,100 points. On the upside, 19,000 points represents the first resistance to reclaim before targeting 19,400-19,500.

According to African Financial Investment, the long-term uptrend established since 2023 remains intact. The index continues trading above its 100-week moving average, and technical indicators that were previously in overbought territory have normalized to more neutral levels.

Corporate Earnings Provide Fundamental Support

Listed companies' revenues expanded approximately 11% in the first half, accelerating from around 7% a year earlier and 4% in the first half of 2024. As full half-year reports arrive, investors can now assess how this top-line growth translates to margins, profits, and balance sheet strength.

TAQA Morocco delivered an instructive example Monday morning. Despite consolidated revenue declining 5.4% to 5.088 billion dirhams—impacted by Unit 3 revision, scheduled inspections, and dollar-dirham movements—EBITDA rose 0.7% to 1.660 billion dirhams and net profit increased 5.8% to 462 million dirhams.

The company's financial position also strengthened. Consolidated net debt fell 10.1% to 4.621 billion dirhams, reducing the gearing ratio from 38% to 36%. Simultaneously, capital expenditures more than doubled from 210 to 515 million dirhams, primarily directed toward low-carbon projects, maintenance operations, and new growth initiatives.

This demonstrates a critical lesson for the coming weeks: declining revenue doesn't necessarily prevent profit improvement or balance sheet optimization.

Mutandis provided the inverse scenario days earlier. Revenue increased 7% to 962 million dirhams, yet industrial EBITDA contracted from 163 to 153 million dirhams and recurring industrial net income dropped from 48 to 33 million dirhams. The company nevertheless maintains its annual EBITDA forecast comparable to 2025.

Profit expectations remain well-oriented overall. AFI estimates approximately 18% growth in expected 12-month earnings. While the pace has moderated from earlier in the year, it remains elevated by historical standards.

Volume Recovery and Valuation Relief

Trading volumes have shown improvement since August. The 20-day average for central market transactions, which had fallen to around 268 million dirhams after approaching 500 million dirhams months earlier, has crossed above its 50-day average and is nearing the 100-day level.

While the recovery requires confirmation and occasional large transactions inflate specific sessions, the trend contrasts favorably with much of the first half.

Valuations have also adjusted with the correction. The forward 12-month price-to-earnings ratio now sits around 16 times expected earnings, near the lower end of its recent range according to AFI. This doesn't mean the entire market has become cheap—performance, growth, and valuation disparities remain significant—but the correction has created opportunities in select names after the strong advances of 2023, 2024, and 2025.

Oil at $107 Complicates the Outlook

The week's opening serves as a stark reminder that the primary threat originates externally. Brent crude climbed to $107.54 per barrel Monday morning, up 2.8% in Asian trading, after already surging nearly 9% the previous week. WTI also exceeded $102.

The temporary closure of Saudi Arabia's East-West pipeline, hit by drone attacks, deprives Riyadh of a crucial route for bypassing the Strait of Hormuz. A merchant vessel was targeted Sunday in the strait, and a meeting scheduled for Monday in Oman between Iran and several Gulf states was postponed.

At these price levels, oil ceases to be merely a source of market volatility. For an energy-importing economy like Morocco, sustained increases directly impact the energy bill, external accounts, and inflation prospects. The pressure can also flow through to corporate results. Mutandis already estimates the annual impact of input cost increases related to the conflict at nearly 78 million dirhams. Upcoming publications will reveal more precisely how listed companies can absorb this new cost shock.

Central Bank Week: Fed Wednesday, BAM September 22

The second test arrives from central banks, with the Federal Reserve announcing its decision Wednesday, September 16. Following last week's inflation data and the renewed surge in energy prices, markets now assign approximately 86% probability to a 25 basis point increase.

The Bank of England follows Thursday, with investors favoring status quo, before the Bank of Japan on Friday where expectations lean toward a rate increase.

The return of energy-driven inflation places central banks in a more delicate position, requiring them to contain prices without excessively tightening financial conditions.

For Morocco, the next appointment is Bank Al-Maghrib on September 22. Several observers expect the policy rate to remain unchanged at 2.25%. Domestic rates have remained generally stable and Moroccan inflation has stayed contained. However, the context has evolved since the June meeting: Brent has crossed $100, international rates have tightened, and the Fed may have raised rates less than a week before BAM's Council.

AFI recently observed some tensions in the bond market, linked particularly to higher Treasury needs, and considers the September 22 meeting an important milestone for fourth-quarter rate visibility. Status quo remains compatible with this configuration, but BAM's statement and updated projections on inflation, growth, and the energy environment will be closely monitored.

Arguments Remain, But Face Rigorous Testing

The three-week correction remains limited in scope. Volumes show recovery signs, valuations have eased, and initial publications demonstrate that several companies continue improving profits and balance sheets. TAQA Morocco added another supporting argument Monday with rising net income, falling debt, and sharply higher investment despite revenue contraction.

On the other side, oil at $107 and returning monetary tightening reduce the comfort margin markets enjoyed just weeks ago. Half-year results will now separate companies capable of preserving margins, cash flow, and balance sheets from those where activity growth translates less favorably into accounts.

The MASI opens the week at 18,615 points. Arguments still exist. This week's results and central bank decisions will determine how much they're worth.

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