Morocco’s fund ratings not affected by sovereign downgrade, Fitch Ratings reveals

According to Fitch Ratings, downgrading the Moroccan sovereign rating to 'BB+' from 'BBB-' «has no immediate impact on the money market funds and the bond fund» rated by the same body on the Moroccan market.

In a statement published Monday, Fitch Ratings explained that entities rated 'BB+' and above on the international scale typically map to national scale ratings of 'AAA(mar)', reffering to its National Scale Correspondence Tables published in June 2020.

«Government securities and reverse repurchase agreements backed by government securities represent the largest component of Fitch-rated Moroccan funds' portfolios. As the relative credit risk of these exposures has not materially changed, there is no direct impact on fund ratings».

However, the agency warned that deterioration in the sovereign credit profile of the country may affect ratings in the future.

It reported that despite the downgrade, Morocco’s treasury bill (bons du tresor) transaction volumes on the secondary market increased by 32% the week. According to data by Bank Al-Maghrib, «the average daily transaction volume after Morocco's downgrade (MAD1,913 million) is of the same order of magnitude as the volume before the downgrade (MAD2,050 million)».

«The average daily transaction volume varied between MAD910 million and MAD4.5 billion a month between January 2020 and October 2020. Volumes peaked in June 2020 alongside a significant policy rate cut of 50bp to 1.5% from 2%», Fitch added.

In October, Fitch Ratings downgraded Morocco’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-’. The decision made the Kingdom the latest sovereign to lose investment-grade status.