The Middle East Investor Relations Association (MEIRA) annual conference and awards were held in Dubai last week, under the theme ‘The age of engagement’. After the dust had settled on the award winners, the speakers, the networking, the debates and the buzz generated by more than 100 IR professionals under one roof, the strongest sense to emerge was that the region has come a long way in terms of engagement, but that there still remains a long way to travel on the journey to a properly engaged regional IR function.
Michel Karimunda, senior investor relations officer at Nordea Bank and a speaker at the event, gave a good analysis of what he witnessed at the conference: ‘The topics we are raising here are typically the same as we are raising in Europe – the answers are different, but that is because this is a growing market where IR didn’t exist a few years ago. I see a good dynamic here, the level of engagement is strong and the attendance is good.’
In other words, the region has moved from the first phase of IR maturity – companies talking about their investment case – to a higher level, where companies are proactively engaging with investors and other stakeholders. In part, this has been driven by a helpful operating environment: in the past 12 months, Saudi Arabia and Kuwait have been awarded emerging market status by MSCI and FTSE Russell, joining the UAE and Qatar, leading directly to inflows of investment dollars running to many billions. The topic of the flotation of the world’s most profitable company, Saudi Aramco, is firmly back on the agenda. And MEIRA’s annual awards recognized the region’s achievements with a distinct sense of growing sophistication and world-class execution.
Karimunda continued: ‘There is still a lot to do. But this is not dependent on the profession per se. That’s what the market will be demanding from the corporates here.’ Higher quality of engagement is not an option in the new environment. Without it, company valuations will suffer.
Finding qualified people to staff the IR function remains a challenge – more so as the demands on and expectations of the function increase. This is true not only in the region but also internationally. Today’s head of IR needs to have a strong understanding of equity and debt markets, an encyclopedic knowledge of the firm’s business and industry, a thorough knowledge of global regulations and crisis communications, and a deep understanding of best practice IR, prompting Karimunda to observe that ‘it’s tough to find people who know everything’.
Another challenge identified was the difficulties in engaging directly with the investor community as a result of the new restrictions imposed by Mifid II regulation. Delegates from across the region agreed that with fewer sell-side analysts covering the region’s companies, it was left to the buy side to fill the gap, which might be seen as an additional burden on an already heavy workload for the investor relations team.
Yet in spite of these headwinds, perhaps the strongest message from the 2019 MEIRA awards was that Saudi Arabia has finally taken its place as the most important capital market in the region, with some world-class IR attracting and holding the attention of analysts and institutional investors.
For the first time, a Saudi firm was awarded the event’s blue riband: the grand prix – leading corporate for investor relations Middle East was given to Al Rajhi Bank, a Saudi Islamic bank. Al Rajhi Bank also won the award for best IRO, best investor relations by a CFO and best corporate for IR in Saudi Arabia.
This stellar performance shows just what is possible when a company commits to invest in its IR function and takes positive steps to build relationships and trust with investors.
And while Mifid II was seen as a regulatory burden, regulatory moves were cited as a driver for IR. Earlier this year, the Saudi Capital Market Authority – the regulator overseeing the Tadawul, Saudi’s stock market – published a Guide to IR for listed companies. And the Abu Dhabi Securities Exchange published ESG guidelines. When regulators are proactively seeking to raise the standards of IR, there has been a paradigm shift, and companies welcome the development.
There was also a lively debate around the debt side of the balance sheet, and Michael Grifferty, president of the Gulf Bond and Sukuk Association, spoke at a session entitled: ‘Debt IR matters too’.
‘I think we can say that DCM [debt capital markets] has arrived,’ he stated. ‘Over the past decade there has been an evolution of a virtuous cycle of greater issuance, greater disclosure, more diversity and investor recognition. This has accelerated tremendously over the past five years.’
This year will see another record year of regional debt issuance exceeding syndicated loans in the region, Grifferty added, citing a healthy environment for debt capital markets: sovereigns continue to issue bonds and sukuk, with Abu Dhabi and Bahrain recently issuing in the same week; more companies and banks are considering issuance; and state-related entities continue to be in demand – for example, Saudi Aramco’s highly successful issuance ahead of the IPO.
And the theme of IR engagement emerged once again as a critical success factor for building strong relationships with debt investors.
Perhaps the most powerful trend in global IR is the emergence of ESG as an investment factor, and this was reflected at the MEIRA event with conference panels dedicated to climate change and diversity. But when one speaker asked for a show of hands on who was producing an ESG report, the response was a tiny fraction of the audience. As a very recent arrival in the region’s IR in-tray, ESG is an area where engaging with investors will be crucial as companies build their understanding of investor requirements.
Enlightened companies will begin to consider ESG as a fundamental element of their investor story, in the same way enlightened companies have invested in their IR capability, and have given the function a voice at the most senior levels.
The theme of engagement ran through the event like age rings through a tree. Time and again it was cited as a key element in IR success, whether around regulations, equity and debt issuance, the challenge of finding the right talent, or the region’s ongoing macro headwinds, world-class engagement was seen as the foundation of success. Delegates left the event in no doubt as to their next steps.
This article first appeared in IR Magzine (Link).