Dubai trails peers in corporate disclosure

Dubai: In terms of the liquidity, volatility and transparency of listed companies in the GCC, Dubai ranks a dismal fifth, according to a new research report released on Monday.

Oman and Bahrain top the list, with scores of 4.69 and 4.34 respectively, followed by Abu Dhabi, which scored 4.13. Dubai scores 3.90.

Based on three main categories of disclosure, trading history and corporate communication, the report examined 581 companies over a one-year period to arrive at a quantitative ranking of them.

According to the report entitled Back to BASICs: A liquidity, volatility and transparency analysis of Gulf-listed companies, it's in disclosure practice, compared to the other two criteria, that Dubai- and Abu Dhabi-listed firms are the weakest.

Withholding data

Dubai and Abu Dhabi have scores of 3.56 and 3.62 respectively in disclosure, suggesting that the companies are still withholding important information from shareholders.

Disclosure of number of shareholders, allowing investors to know the foreign ownership percentage, disclosure available in English and complete interim results are a few among the 25 measures for disclosure.

The GCC average score on disclosure, one of the three components of BASIC, or Behavioural Assessment Score for Investors and Corporations, is 3.19, with Oman and Bahrain topping the list with scores of 5.07 and 4.60 respectively.

"Abu Dhabi and Dubai are still very secretive," said Amer Halawi, managing director of The National Investor, which collaborated on the report with Hawkamah, the Institute For Corporate Governance. "Oman and Bahrain have been around for a long, long time. They proved themselves. They don't have as many things to hide as Abu Dhabi or Dubai."

Sectorally, in the Gulf, real estate happens to fare poorly - third from the bottom. Banking, utilities and telecom scored the best.

"Real estate [has been] the object of all the recent problems in Dubai - imprisonment, scandals, you name it ... Perhaps, have we had better disclosure, better corporate communication, better trading history ... there wouldn't have been such scandals," Halawi said, by way of "fun explanation" to answer why real estate ranks so low.

On the component of trading history, that also includes stock volatility and liquidity, Dubai scored 4.45 and Abu Dhabi, 4.92, lowest among all.

Both the "new kids on the block" started trading in 2000. Some measures under this component include, stock volatility, trading history, frequency and average daily turnover.

Liquidity factor

"Abu Dhabi and Dubai are penalised by the trading history parameter and the reason behind that is they are young markets," Halawi said. "However, there is another element you have to bear in mind which is liquidity. Both the markets have many, many listed shares, but a lot of them are not very liquid."

In fact the report points out that in Dubai, about a third of listed companies trade less than $3,000 a day.

However, all is not bleak.

On corporate communication, UAE markets are the leaders in the region with individual scores of 5.34 and 4.97 for Abu Dhabi and Dubai.

"Younger and smaller markets like the UAE top the chart, perhaps as a sign of more progressive behaviour, in a conscious and dynamic effort to capture increasing international trading flows," he report pointed out.

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