x Abu Dhabi, UAESaturday 20 January 2018

Results take too long, say fund chiefs

Fund managers saying reducing the time horizon whereby publicly listed companies should report their quarterly and annual results will bode well for the local markets.

Public companies across the Emirates should be given less time to report their earnings every quarter to reduce the potential for insider information leakage, fund managers say.

A shorter results reporting period could also help stimulate trading at times when investors prefer to stay on the sidelines ahead of an earnings announcement. The call comes as the country's two main stock exchanges try to boost trading volumes that have fallen sharply over the past two years.

The value of shares bought and sold on the Dubai Financial Market declined almost two thirds in the first quarter of this year to Dh10 billion (US$2.72bn) from Dh28bn last year.

"By minimising the time period of announcement, you are diminishing the chance of people abusing their powers and positions in companies by making use of those announcements ahead of time," said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Abu Dhabi. "With the technology and sophistication we already have in our markets, we should look into improving our own transparency and reporting as well."

Erratic company price movements ahead of market-moving regulatory disclosures have drawn attention from investors and regulators in recent years and led to calls for reform of company reporting requirements.

According to regulations set by the country's stock exchange regulator, the Securities and Commodities Authority, companies should report their quarterly results within 45 days of the end of the quarter and annual results within 90 days of the end of the financial year.

"In the boom days, companies used to rush to disclose their earnings to the public, but after the crisis we find those with weak results wait until the very last moment to report," Mr Yasin said.

"It is sad that while some companies are publishing their annual results, others are preparing to disclose their quarter results."

Haissam Arabi, the chief executive of Gulfmena Investments in Dubai, said: "The grace period in the UAE is allowing for subdued trading because it puts pressure on the market as people get bored and start profit-taking before results come out. You lose out on trading opportunities. By the time the second-quarter results are released it is already mid-July and most people travel around that time, so the liquidity is not there."

The delay distorts stock prices and fuels rumours that could be avoided if companies had a deadline to provide preliminary results, said Sachin Mohindra, the lead manager for Invest AD's GCC Focused Fund.

"The preliminary numbers would lead to less speculation on what net income is and then analysts can study the margins when the full results come out," he said.

Saudi Arabia's regulation on financial reporting could be seen as an example for regional regulators where companies must release their annual financial statements within 40 working days of the end of the fiscal year and quarterly financial statements within 15 working days of the end of the period.