Free and vigorous financial markets – such as the one the UAE wants to create as the premier market place of the Gulf, if not the Middle East – depend crucially on the unimpeded and regular flow of reliable information.
Without this flow, potential investors cannot reach a view on the valuation of stocks, nor can capital-raisers rely on the
quality of the markets providing their funds.
That is the accepted view in most of the international markets the UAE hopes to rival, and is also the logic behind the creation of the Dubai International Financial Centre as an independent and autonomous market place. Above all, this view places a premium on the quality of independent research, and all the big international finance houses now produce detailed investment research on corporates listed in Dubai and Abu Dhabi.
So I was disappointed to hear the view of one of the leading executives in the investment research field, who has a reputation for producing high-quality independent work, in a private conversation recently.
“Many corporates in the UAE, especially ones with close links to the political establishment, do not get the point of independent research. They will talk more freely with the fund managers than with the analysts, and in many cases, especially if you have taken a negative view in the past, they will not talk to you at all.
“This misses the point of research. It is not about reaching a buy or sell recommendation, and putting out a ‘sell’ does not mean a company is bad. It means it is expensive. Likewise, a ‘buy’ means it is good value, not that it is a good firm. The point of research is to add value, not to reach a recommendation. It is all part of the investment process that is taken for granted everywhere.”
This is a depressing scenario, if true. I wonder how many others in the UAE investment community would agree?
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