eFinancialCareers

The demand for equity research analysts in the UAE might be on the up, but a new law could place restrictions on what they can report and undermine their objectivity.

In the West, equity researchers have to be careful not to release misleadingly positive data on companies, but new rules proposed by the Emirates Securities and Commodities Authority (Esca) discourage negative opinions about UAE firms.

Esca says the law is designed to prevent unscrupulous people acting as analysts to skew share prices for their own benefit.

As is the case with a number of laws in the UAE, firms in the Dubai International Financial Centre – which includes most of the international banks – will not be affected. Therefore, local firms will bear the brunt of this perceived lack of independence.

Walid Shihabi, the head of research at Shuaa, the UAE-based investment bank with the largest Esca-regulated equity research team, says: “You cannot get involved in the underlying opinion. You have to enforce the independence of sell-side research and allow coverage that is both positive and negative, not allow analysts to be intimidated into not releasing negative coverage.”

Barbara van Muir, director, financial services, at recruiters WoodHamill Ingram, says demand for research analysts is taking off: “There is increased interest in research analysts, especially those with specific sector expertise in construction or property, financial services, and the oil and gas industry. As more and more institutions start covering the GCC markets, and as those markets mature by leaps and bounds, I expect that trend to continue.”

Robert McKinnon, head of research at Al Mal Capital, says: “International banks and DIFC-domiciled banks would be able to write anything they want, while local investment banks would be restricted. Therefore, they will better be able to attract institutional clients that require research.”

And if the reputations of local banks do suffer, they could find disillusioned staff making the move to multinationals.

Omar Taha, managing director of headhunters the S&T Group, says: “Local investment banks are really looking to develop their equity research operations, but international investment banks are playing catch-up and therefore they’re being incredibly aggressive in their recruitment policies.”