Casablanca Stock Exchange: Equity Risk Premium Rises by 30 Basis Points in October 2025

Tuesday, October 21, 2025

Casablanca Stock Exchange: Equity Risk Premium Rises by 30 Basis Points in October 2025

Moroccan equity markets | risk premium analysis | valuation metrics | emerging market strategies

Essential insights into Morocco’s equity risk dynamics, tailored for global institutional allocators.

Attijari Global Research (AGR) highlights a modest uptick in the survey-based equity risk premium, signaling enhanced compensation for Moroccan market exposure amid declining sovereign yields. This update from AGR’s October 2025 “Research Report - Strategy” offers critical valuation context for foreign investment firms evaluating MASI-linked positions.

Key Risk Premium Metrics

Survey-Based Risk Premium

The survey-derived equity risk premium (ERP) for the Casablanca Stock Exchange edged higher by 30 basis points to 6.7% in October 2025, up from 6.4% in November 2024. This adjustment reflects a narrowing of the risk-free rate, with the average 10-year Moroccan Treasury bond yield declining to 2.81% from 3.24% over the same period.

Investor required returns on equities remained anchored at approximately 9.5%, underscoring stable yield expectations in a low-rate environment that favors equity overweighting for total return-oriented mandates.

Historical Risk Premium

The historical ERP moderated by 40 basis points to 4.5% in October 2025, driven by a downward revision in the MASI index’s 20-year average annualized return to 10.5% from 10.8%. This recalibration provides a backward-looking benchmark, highlighting the Casablanca market’s consistent delivery of mid-single-digit excess returns over sovereign debt.

Prospective Risk Premium

Looking forward, the prospective ERP climbed 30 basis points to 6.6% for October 2025, incorporating an upward adjustment to the compound annual growth rate (CAGR) of listed companies’ earnings at +10% through 2027. AGR maintains a long-term normative CAGR of +4%, tempering near-term optimism with structural growth constraints and positioning the market for measured appreciation.

Valuation and Investment Implications

This ERP evolution underscores a more compelling case for foreign institutional investors in Moroccan equities, where the widened spread over risk-free rates—now at 6.7% survey-based—enhances the attractiveness of MASI constituents for diversified emerging market portfolios. The stable 9.5% required return aligns with global benchmarks, while the +10% near-term earnings CAGR forecast supports potential re-rating opportunities in sectors like banking (e.g., Attijariwfa Bank) and industrials.

However, the downward historical adjustment and normative +4% long-term growth trajectory caution against over-allocation, recommending a balanced approach with hedges against currency fluctuations and regional geopolitical risks. In the context of the Casablanca Stock Exchange’s recent USD 100 billion capitalization milestone, these metrics affirm Morocco’s role as a yield-efficient gateway to North African alpha generation.

For global asset managers, the modest ERP uptick may justify tactical increases in exposure, particularly as declining bond yields compress fixed-income alternatives and bolster relative equity valuations.