Qatar was recently upgraded to ‘Emerging Market’ from ‘Frontier Market’ status by Morgan Stanley Capital International (MSCI), and listed companies in the country are being watched by global investors, who seek better transparency and investor relations.
According to state-owned Abu Dhabi Investment Company (Invest AD), Qatari firms need to “step up their investor relations and demonstrate greater transparency.” In 2008, the MSCI did not consider elevating both Qatar and UAE from Frontier Market status because of shortcomings in market technology and mechanisms, liquidity and levels of foreign investor participation. The emerging markets status may provide an incentive to market regulators of pushing for “higher standards of corporate governance and disclosure.”
Even though miracle improvements are not expected over the short-term, Qatari firms are likely to become more attractive for global investors in the long run because of improved market efficiency and maturity. Foreign investors may also actively participate in Qatari stock markets because of attractive valuations and greater market liquidity. However, greater foreign participation in the equity market is only possible if investors become confident about the long-term sustainability of local businesses.
Some of the largest family businesses in Qatar need to embrace the concepts of transparency and developing better investors relations. By reforming the structure of these businesses and accepting international business practices, these businesses may be able to win the confidence of global investors and witness greater flow of capital. Transparent Qatari businesses would also be better placed to position themselves among the top regional businesses.
The tiny Gulf state of Qatar has also pushed for transparency in the functioning of government agencies and other public bodies. With the establishment of an anti-corruption watchdog, the country aims to join the club of world’s 10 most transparent countries. The regulator is responsible for developing practices and systems to promote transparency, and to probe allegations of power abuse and public funds.