Corporate Governance UAE

The good, the bad, the ugly of investor relations in the UAE and Middle East


Corporate Governance UAE

Postby sharewadi » Fri 11 May 2007 12:37

[edit] Forgot there was this topic :oops: and started another one, will add updates there until both topics merged...
ESCA calls on media to report accurately - GN 21 May 2007 [/edit]

There has been a spate of companies with sudden jumps in share prices on heavy trading in the past few weeks, with subsequent denials from companies about having any information that may explain the sharp rises.

Some of these denials sound a little hollow - especially in the cases of Al Dar Properties (ALDAR), Sorouh Real Estate (SOROUH), and Arabtec Holding (ARTC) last week given that significant news was released shortly after the jump in share prices.

Ironically (of course), the UAE stock market regulator, Emirates Securities and Commodities Authority (ESCA), recently had something to say about coporate governance at the end of April...

ESCA corporate governance - new rules issued 30 Apr 2007

I'll add links to relevant topics here, although with the spate of news recently, maybe I should start a separate forum :shock: . Some of the more important examples:

EBI and NBD merger - news 06 March 2007

EBI (Emirates Bank) and NBD (National Bank of Dubai) merger - 06 Mar 2007, announced in news, caught ESCA and DFM by surprise, trading in NBD and EBI shares was suspended by DFM until more details provided (somewhat moot since shares rarely traded anyway). A cursory one page letter from the Chairmen promising to do the merger properly was deemed to be sufficient. Which seemed to be at odds with all the press releases about improving corporate governance and investor relations in the UAE.

EMAAR - Dubai Holding deal - news 18 Mar 2007

News was vague initially, DFM (Dubai Financial Market) and ESCA appeared to be taken by surprise. Share trading was not suspended despite DFM doing exactly that to NBD and EBI the week before for what appeared to be similar disclosure tardiness.

On 20 Mar 2007, Emaar promised more details within 2 weeks, nothing seen 6 weeks later (11 May 2007).
EMAAR will issue 2.4 bn new shares to Dubai Holding - Press Release 18 Mar 2007
EMAAR landbank to double, Dubai Holding gets convertible bond 19 Mar 07

But perhaps those comments about Emaar are unfair? After all, back in Nov 2006, Mr Mohamed Ali Alabbar, Chairman, Emaar Properties said “Effective corporate governance is crucial in determining the direction that any company will take”.

EMAAR Head of Corporate Governance & Investor Relations appointed - 15 Nov 2006.

SOROUH late results 2006 H1

SOROUH filed late accounts for 2006 Q2 - was only fined 100,000 dhs by ESCA in Aug 2006. It was the first time a company had been fined for late accounts. No fines seen since then despite several companies filing late accounts. In fact, in February 2007 ESCA extended the deadline by 2 weeks for the companies that had already missed the 31 Jan 2007 deadline for 2006 final results.

ESCA extends deadline for 2006 FY disclosures 2 weeks - GN 04 Feb 2007

Financial Results Filing Deadline

In March 2007, ESCA revised the filing deadline to give companies more time, going against international trends despite their claim of the opposite.

ESCA extends FY results deadline to 3 months - GN 22 Mar 2007

Dubai Islamic Bank (DIB) Bogus Trading 28 Aug 2007

28 Aug 2005 - DFM AED 11.1 bn trading, DIB AED 9.3 bn trading - DIB bogus trades cancelled
Massive trading in DIB shares (daily volume for the past couple of years on DFM is usually AED 500m - AED 2.0 bn) to manipulate the share price prompted some quick action from ESCA / DFM with all DIB trades for that day cancelled. Big fines and jail sentences were imposed on several brokers and traders. However, as of May 2007, the case is still not resolved and no one has been actually punished.

Some other relevant topics...

UAE corporate governance - another Enron coming? GN 24 Mar 2007
ESCA bans 2 brokers, warns 21 others - WAM 02 Jan 2007
DFM & ADSM unstable due to lack of transparency - GN 31 Mar 2007
DFSA Chairman talks about shareholder confidence at IPO summit 26 Mar 07
Corporate failure likely in Dubai due to lack of governance - GN 13 Mar 2007
UAE auditing regulations tightened up - GN 08 Feb 2007
ESCA to supervise firms and IPOS instead of Economy Ministry - R 06 Feb 07
Poor corporate governance in UAE - IIF & Hawkamah survey - ET 24 Sep 2006

April / May 2007 Insider Trading?

AGTHIA share price increasing - beginning May 2007 (company denial issued)
ALDAR share price sharp increase - May 2007 (company denial issued but news released of major projects and purchases)
AMLAK Share Price limit up and heavy trading - Wed 09 May 2007
ARTC investigates insider trading before 2007 Q1 results out - Tue 08 May 2007
DRIVE share price up - April 2007 (company denial issued)
FGB share price jumps - Mon 07 May 2007 (company denial issued)
GCEM share price up - April 2007 (company denial issued)
SOROUH stock price sharply up - May 2007 (company denial issued but announces large bond issue)

Of course, the UAE is not unusual and the above examples do not put me off from investing in stocks listed on the DFM and ADSM.

Most emerging markets seem to have such issues, and probably worse. Even established markets like the US are hardly free from insider trading and stock manipulation. If you have access to live feeds of order books on the NASDAQ for example, you can easily see how large brokers/traders appear to manipulate share prices up and down especially for smaller companies.

Happy investing :mrgreen:

(Please add company specific comments to the relevant topic. Add further examples of corporate governance / insider trading / investor relations issues in the relevant forum with a link in this topic)
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