Morocco’s elections: Fragmentation, disengagement and PJD’s major return

Morocco's PAM won 97 seats in the 395-member parliament, displacing the governing RNI, which fell to 66 seats from 102; the PJD rebounded sharply to 54 seats from 13. Turnout dropped to 38.08%, versus 50.86% in 2021, marking the second-lowest parliamentary-election participation rate under King Mohammed VI. PAM, RNI and Istiqlal could retain a three-party governing coalition with 228 seats, but campaign tensions between PAM and RNI create uncertainty around coalition negotiations and the next government.

Analysis

The investable issue is not electoral rotation but whether coalition bargaining delays the next finance-law cycle and public-investment execution. Moroccan listed construction and materials names—TGCC, LafargeHolcim Maroc (LHM) and Marsa Maroc (MSA)—are most exposed to any slippage in infrastructure awards, while banks such as Attijariwafa Bank (ATW), Banque Centrale Populaire (BCP) and Bank of Africa (BOA) face a more mixed setup: loan-growth support from public spending versus potential pressure if fiscal transfers or subsidized-credit programs expand.

A broad governing arrangement would likely preserve Morocco’s investment-grade policy narrative, including infrastructure, tourism and industrial-location initiatives; that limits the case for a sustained sovereign-risk repricing in the next 1-3 months. The more material tail risk is that weak electoral participation becomes visible through protests or higher social spending, lifting the fiscal deficit and crowding out private credit over 6-18 months. This is primarily a margin and duration risk for domestic banks, rather than an immediate earnings shock.

Contrarian view: political headlines may produce an exaggerated discount in thinly traded Casablanca equities despite limited near-term authority to alter core economic policy. Conversely, investors should not treat an apparently stable coalition as automatically bullish: fiscal accommodation can support nominal GDP while weakening bank asset quality and sovereign spreads with a lag. The thesis is falsified if coalition formation is rapid and the first budget signals unchanged deficit targets, intact capital expenditure and no expansion of untargeted consumer subsidies.

Key Decisions for Investors

• No immediate directional Morocco trade: keep Moroccan equity and sovereign exposure neutral until coalition terms and the first budget priorities are known, likely within 1-3 months.
• Set a conditional long basket of TGCC/LHM/MSA only after confirmed infrastructure-budget allocations or major tender releases; target a 10-15% upside over 6-12 months, with exit if public-capex guidance is cut or award activity is delayed by more than one quarter.
• Prefer ATW over BCP and BOA if adding financial exposure after budget clarity: ATW has relatively greater fee and cross-border earnings diversification, while domestically concentrated lenders carry higher downside if social-policy spending pushes rates or nonperforming loans higher. Reassess on any sovereign-spread widening of 50bp or more.
• Monitor Morocco hard-currency sovereign spreads and local-currency bond yields as the cleaner political-risk signal. A sustained 50-75bp spread widening without an external macro shock would justify reducing domestic-bank exposure before earnings estimates reflect higher funding costs.