Middle Eastern companies seeking to attract long-term investors should focus less on rosy corporate visions and more on their assessment of the challenges ahead, two leading institutional investors have warned.
Fewer sales pitch-style presentations to investors and more frank assessments of companies' potential pitfalls would go far to retain the confidence of shareholders, they said on a conference call organised by the Middle East Investor Relations Society.
Putting too positive a gloss on a company's potential performance was likely to be viewed with scepticism and could deter institutional investors, said Bassel Khatoun, a co-head of equity asset management at Franklin Templeton for the Middle East.
"Putting a positive spin on a company's operating environment is generally unhelpful," he said. "We really value management's candid assessment of reality."
Middle Eastern companies should aim for consistency in their communications to potential investors and not shy away from making disclosures beyond the regulatory minimum, said Hany Bassiouny, an assistant portfolio manager at Aventicum Capital, a recently established joint venture between Credit Suisse and Qatar Holding.
"We definitely favour presentations that are factual rather than 'salesy' in nature. Investor presentations should not be used as pitch documents," he said. "Various accolades and awards aren't particularly useful in assisting investors in making an investment decision, that's a key area to avoid."
The UAE's stock markets are dominated by retail investors, with the result that many locally listed companies lack institutional investors on their register of shareholders.
This deprives them of long-term backers, which can make trading more volatile and vulnerable to flows of hot money.
Greater disclosure on the part of companies would go a long way towards helping attract institutional capital, Mr Khatoun added.
"Shareholders and investors need to be able to take an informed view on a public company. The unfortunate reality is that investor confidence is hard won but easily lost," he said.
