Markets turned, so did investors

For the local bourses the year so far has been good. Year-to-date, the markets combined are up 42 per cent. The index was up 12.5 per cent in the first half. And analysts I surveyed at that time were conservative in their estimates for the year. The range varied from 12 to 25 per cent for 2007.

You might even have picked up the gist of that much a week ago (just testing)! This past week is not really about just feeling good about the numbers - much as we might want to dwell in that warm feeling.

But if this year can be termed the start of a sustainable path to market recovery, it is also the year when investors came into their own and showed rising levels of maturity. Investors here are still by and large retail, although the entry of foreign institutional investors has picked up. Not too long ago we were all saying how greedy, irrational and immature those same retail investors were, although we could generously cut them a bit of slack in the face of relatively young and volatile markets.

A fund manager acquaintance has said: "With each passing day, investors are learning and assimilating, and making good on the mistakes of the past."

Faced with a dramatic fall in 2006, which essentially meant huge losses, investors had no choice but to take it in their stride. And they did it well. They could also be said to have reacted well to Emaar's lack of transparency on its land-equity deal with Dubai Holding. Some analysts suggested that the share price drop to below Dh10 at one point punished the company for its lack of clarity on the issue. Shareholders of the company showed dissent when a 20 per cent dividend was announced. It's debatable whether such a percentage should have satisfied, but the fact that investors were more demanding showed their increasing expectations.

Observers felt that investors made it clear that they were not to be treated as naïve spectators any more. Investors now want companies to address issues of corporate governance and government control.

But investors still feel there is a lot to be desired from companies when it comes to answering direct queries.

There's an example I can give, again relating to the market-leading stock. One investor who had written to Emaar's investor relations unit much before the company came out with their own statement of how far the subprime crisis was going to impact their margin - Emaar bought John Laing Homes - never got a reply.

Nuisance factor

Of course, that's not unheard of in many realms, but neither can it be viewed as best practice, even if there's a nuisance factor for big companies when addressed by small shareholders. AGMs in major financial centres like London stand testimony to that!

Recently he wrote again to Emaar asking about Emaar-MGF developments (i.e. in India). I tried through their PR firm to get feedback. It's been more than a month since I heard that a "team is coordinating to provide a response". It's time therefore for companies to build some confidence by being more forthcoming with those on their register.

Let's hope 2008 will be the year when investor relations move up the agenda for the companies themselves, and live up to their name, rather than just being a public relations face. The maturing of local markets does suggest that should be where we're heading.

Faced with a dramatic fall in 2006, which essentially meant huge losses, investors had no choice but to take it in their stride. And they did it well.