The Casablanca Stock Exchange's scientific committee for indices met on October 30 and decided to temporarily reinstate the floating and capping factors that were in effect before the annual review on October 29. This decision aims to stabilize the market after the annual review caused significant changes in the index composition. The committee will finalize a revision of the index management rules within a month.
The turmoil was triggered by a change in Managem's floating factor from 15% to 10%, which reduced its weight in the index from 10.55% to 6.86%. This change forced index managers to sell the stock, leading to a downward price movement. As a result, the stock was suspended on October 30, pending important information about the company. The suspension duration and resumption date were not disclosed.
Market professionals noted that the weighting change created a mechanical over-weighting for index managers, who were forced to sell the stock. The exact reason for the suspension was not specified, but rumors circulated about a potential capital gain of around 1.5 billion dirhams from the sale of 45% of a gold project in Sudan. Managem had previously reported strong semi-annual results, with a net profit of 3.77 billion dirhams, up from 380 million dirhams a year earlier.
The committee's decision to reinstate old weightings does not imply a decision on resuming Managem's stock trading. The upcoming revision of index management rules will address several aspects, including integrating new listed companies, calculating the floating factor, and revising capping factors. The new rules will be published before taking effect.
This episode echoes the integration of SGTM into the index on its first trading day, which raised questions about the methodology. It highlights the sensitivity of the Moroccan market, where the weight of a few stocks makes index managers dependent on technical decisions. The market is considered narrow, with a limited number of liquid stocks.
The Casablanca Stock Exchange's decision aims to mitigate the impact of the weighting changes on the market. By reinstating the old weightings, the exchange seeks to maintain stability and avoid further disruptions. The revision of index management rules is expected to bring more clarity and transparency to the market.
The Managem episode demonstrates the need for careful consideration of index management rules and their impact on the market. The Casablanca Stock Exchange's efforts to refine its methodology and address market concerns will be closely watched by investors and market participants.
Key points
- The Casablanca Stock Exchange has temporarily reinstated old weighting factors for its index calculation after a turbulent episode involving mining company Managem.
- The decision aims to stabilize the market after the annual review caused significant changes in the index composition.
- The revision of index management rules is expected to bring more clarity and transparency to the market.
