Monitoring body needed for UAE bourses

A leading UAE businessman has called for the creation of a body to monitor the local stock market to ensure more accurate data, warning that lack of transparency by companies will only discourage foreign investors.

Khalaf Al Habtoor, chairman of Al Habtoor Group, one of the region’s largest family business conglomerates, said the UAE has a strong economy and financial system but added this is not enough to lure in foreigners into its bourses.

“We need more compliance by companies listed on the UAE bourse…in this respect, we need to have an autonomous body to monitor the bourse to ensure safe dealings and protect the rights of the investors,” he told Emirates24|7.

“We need to have a more organised bourse if we want global investors to continue investing their funds here…investors need to have confidence in our market if a listed company releases its financial results or makes an announcement…we should work to develop our market in order to compete with such leading markets as New York, London, Paris, Frankfurt and key Asian markets.”

Habtoor said the UAE bourse, one of the largest markets in the Middle East, can benefit from the fact that the country has a strong economy and successful financial systems in Dubai and Abu Dhabi but added: “We have to improve compliance by companies…look at what happened to some companies in the West when they gave wrong information to the investors although they have been there for decades.

“We must improve transparency in the local market…this is essential to achieve integrity in the UAE bourses…we have to give investors accurate and reliable financial information in order to take strong and informed investment decisions…...investors’ confidence is the driving force in the market.”

Habtoor urged the UAE to enforce strict bourse dealing procedures to avert any sudden movements or developments that could lead to sharp fall.

He said listed firms need to have a prior consent by authorities before making any announcement to avoid unjustified movement in stock prices or insider-trading.

He noted that the UAE bourse was ranked among the best markets in 2013 by Merrill Lynch (Bank of America), describing it as a wonderful development.

But he added: “We do not want any speculation in our markets because this would lead to crash…organisation of the bourse is a good guarantee for investors but if it is not enforced properly, then we are only wasting ink and paper.”

“What really worries me is that if companies fail to company with organisation measures, investors will lose their confidence in the market and seek alternative investments…we need to maintain the integrity of our markets by enforcing global criteria expected by the investors and shareholders…this means that we need to devise a strong governance system for companies, a sound reporting mechanism and suitable procedures for internal auditing and control.”

Habtoor said investors also need to be educated about mistakes that could cause great damage to local markets, adding that this should prompt companies to employ qualified experts in investor’s relations and publish regular data on their websites.

“This is practiced in the West and should be done here…investors want to be informed on company’s announcements and all data must be always monitored and scrutinised by an autonomous market authority….the Emirates Securities and Commodities Authority must play a more active role in this respect along with the Dubai financial authority and other relevant organizations in the UAE.”

Habtoor said last year’s decision by Morgan Stanley Capital International (MSCI) to upgrade Dubai’s bourse to an emerging market was an important step that reflected the growing confidence in our resources.

“This move also means that the listed companies are now more vulnerable to auditing and evaluation by global funds and investors who enter the market,” he said, adding that the UAE is looking forward to be upgraded to a developed market in 2018.

He said this should prompt UAE markets to improve compliance in order to be able to compete with major markets given its leading economic and financial role.

"There is not time for tolerance...we should not risk our reputation because of a minority of companies which do not abide by international criteria and practices...we want all firms to be accountable....we must enforce this right now or we will risk losing foreign investors forever,” he warned.

Habtoor called on companies to hire qualified management teams and to chalk out a clear and definite plan to face any management challenges and reassure investors.

“Control authorities should always check the status of any listed company...they should exercise this right to ensure accurate and correct information is given by listed companies to investors...maintaining the reputation and credibility of the UAE markets is the responsibility of these authorities...if this credibility is lost, then our economy will need a very long time to regain confidence.”
 

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