A world awash with cash: the CEO of the Qatar Stock Exchange talks IR

May 26, 2015
<p>Rashid Al-Mansoori discusses the importance of investor relations, the impact of the Gulf country&rsquo;s MSCI upgrade last year, and convincing cash-rich family firms to go public</p>

The Qatar Stock Exchange (QSE) became the region’s first exchange to launch a program rewarding high-performance investor relations at the end of April, run with IR consultancy Iridium.

How do you think the Investor Relations Excellence Program will affect Qatari IR?

When we thought about designing the program we were clear in our minds that the objective was to do more than merely hand out an award; in launching the region’s first exchange-driven recognition system, we were looking to build on the work we have already been doing with our listed companies. Specifically, we want to fortify investor confidence in Qatar’s overall market, inspire excellence in investor relations in Qatari companies and set new benchmarks in the area of investor relations in the region.

Rashid Al-Mansoori, CEO of the Qatar Stock Exchange

Rashid Al-Mansoori, CEO of the Qatar Stock Exchange
‘Many companies are doing good work in IR but we are encouraging the others to catch up’

There’s a reason we’ve classified our awards for large, medium and small-cap companies because many big companies – and some small and medium ones as well – are doing good work in IR but we are encouraging the other companies to catch up. We need the website to be informative for investors, for example, with easy access to information. We need investor inquiries to be answered without delays. We need people dedicated to IR within these companies. We need this to be standard in Qatar.

[All Qatari companies will automatically be entered into the IR Excellence program, which consists of two main areas, a voting system with winners chosen by the investment community and website ranking based on three main categories: technology, content and service. The results will be revealed in December.]

In what ways do you think Qatar-listed companies need to improve their IR programs? Are there any particular areas Qatari companies in general need to improve?

The QSE has invested significant resources in recent years in encouraging companies to communicate to investors with transparency and credibility for the benefit of all market participants, strengthening the perception and standing of Qatari companies in the world.

There are, of course, many overlapping regulations that cover the day-to-day disclosure investors would expect of a stock market but that regulatory environment is the minimum necessary.

Particularly since Qatar’s recent inclusion in global indices such as MSCI and S&P, it is important for our listed companies to be doing more as the demands of investors increase. We think corporate access in its broadest sense for both retail and institutional investors is an area all listed companies need to constantly rethink in light of these increasing demands.

One aspect of the excellence program I would like to highlight is that there is a natural ‘feedback loop’, which the exchange will be able to use to educate our listed companies as to exactly which areas are in need of improvement; critically, this information will come not from the exchange but the investor community.

Would the QSE consider a mandatory IR requirement, as there is in the UAE?

Each country needs to look at the most appropriate solution for its own set of circumstances. I think that in many jurisdictions around the region and the world, while disclosure itself is rightly mandated, IR more broadly is partly controlled by the market mechanism of investor pressure and best practice.

The disclosure regime in Qatar is in large part determined by the Qatar Financial Markets Authority’s offering & listing rules, though elements of the Commercial Law cover board meetings, directors’ responsibilities and so on so this is not an area that is purely up to the exchange. But I think IR does need to be mandatory for companies because it will improve communication with the investors, so this could be on the horizon.

Regardless, we are keen to ensure best practice in Qatar as our listed companies are in the global public eye on a daily basis; we, along with other concerned parties, will always seek to do what is best for our market and its standing in the global investment community.

In what ways has the MSCI upgrade of Qatar to an emerging market affected listed companies/prospects to list? To what extent do you feel the upgrade has affected the country’s IR community?

The MSCI upgrade has brought more liquidity to the market and there has also been a clear increase in interest in Qatar overall and in our listed companies both before the formal inclusion and since. We saw this quantitatively in the roadshows we held in 2014 and so far in 2015 where there was increased interest to meet our listed companies from a broader spectrum of investors, including some that previously had not looked at Qatar in great detail.

We are also aware from the IR professionals in our listed companies that they are seeing an increased volume of calls/meeting requests from regional and international investors.

Entry into the emerging markets universe has changed the peer group against which Qatar is competing for capital, too; while the Qatar investment story stands up well, it is important our listed companies are able to articulate that story properly. Ongoing education in the area of IR and the Excellence Program itself is part of this process of inspiring our listed companies to do more.

To what extent is the current price of oil likely to push more firms to list?

The lead times for IPOs are long, particularly in this region, so we do not necessarily see a direct short-term link. But to the extent that companies/economies have less internally generated cash and with the banking sector maybe unable to grow its asset base as quickly, it is possible companies will seek to tap the public markets rather than more traditional sources of finance.

In our day-to day marketing, one of the themes has always been that the public markets are a viable alternative for growing companies seeking to reduce their reliance on shareholder loans and banks, for example. We think this would be healthy as the corporate sector in the region is too reliant on debt as a means of finance.

The world has been awash with cash, partly as a result of quantitative easing and ultra-low interest rates (as well as the oil/gas revenue), but as we all know this situation is changing, [and] the interest rate cycle is also about to change. It’s also worth noting that Qatar’s economy is less sensitive to oil price changes with fixed-priced gas contracts being long-term in nature.

What impact do you expect the opening of the Saudi market to have on the QSE?

[The opening of the Saudi market] will be an important moment in the growth of the capital markets in the region. To use a football analogy, however, Qatar can only focus on its own game; we have a compelling macro-story and the infrastructure in place to facilitate efficient investment from both local and international investors.

With an ongoing focus on IR through initiatives such as the IR Excellence Program, we believe Qatar is leading the way in elements of best practice and we are ready and able to compete in the regional and global capital markets. In the end, however, no investor will go to only one market – they all want to diversify.

The QSE currently has 43 listed companies. What do you think would inspire more firms to go public?

The motivations for going public are many, varied and – of course – company-specific. Part of the QSE’s responsibility to the market is capital formation and that means first educating [firms] on the benefits of being listed.

Many of [Qatar’s] big, family-owned companies are cash-rich and so are not necessarily looking for capital but rather for the legacy and continuity of their business. Succession planning for second or third generation family companies is one area we have been particularly focused on. We’re trying to inspire family-owned companies to be champions in 100 years – not just in the next 10. One way to do this is as a listed company with executive management and owners who work together to ensure the long-term success of the business for future generations.

We try to make companies aware of the advantages of listing. They have some concerns about disclosure or losing control, for example, and we try to take these fears away. We try to show them examples of other firms that went public, increased their value and kept control… [such as] real estate company Ezdan. We have also brought in some companies from Europe that have been through the listing experience to talk to Qatari firms about the benefits. Away from family firms, the government has [further] stated an intention to bring companies to the market in the coming years and we are looking forward to that.

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