Is Tehran Stock Exchange Index truly representing the overall market behavior?

This is a common question asked multiple times by market practitioners and observers of Iran’s capital market. This is essentially due to the asymmetry readily witnessed by those who buy and sell stocks of companies listed on Tehran Stock Exchange (TSE).

Indeed, there are occasions when mixed signals are communicated by the All-Share Index if you happen to make professional investment decisions based on interpretations of the benchmark index.

For instance, you might see in one typical session of the exchange market that the gauge is in the red zone by about 300 or 400 points down but there are many sectors across different market boards that are experiencing gains rather than losses in price in spite of the general negative environment usually seen under such circumstances.

In one recent study performed by Armin Sadeghi Adl, Tehran Stock Exchange Company’s expert at Research Management Division, he underlined the fact that there is a meaningful diversion between two major indexes used to quantify the general behavior of the equity market namely, value weighted index—being constantly blamed for its shortcomings to illustrate the true performance of the market—and equal-weighted index, which was introduced just two years ago to the market activists and researchers.

As Mr. Adl explains about his research in his article, published by the well-reputed economic Daily, Donya-e-Eqtesad, he assures us that value-weighted Index or locally known as Overall Index does not genuinely illustrate the reality of the market since this measure is initially composed of weight of firms based on their market cap size, which is very misleading. This is because of the calculation measures employed to specify the influential companies on the Index.In In fact, the number of listed companies allowed to be included in this computation does not exceed 17 from 321 ones present in TSE. Additionally, their market cap goes beyond 50% which is in stark contrast to the 10%, belonging to  just 231 companies.

Thus, this is to say that TSE Index is impacted by small fraction of giant names. Consequently this is not a guiding element to those who adjust their investment decisions and strategies solely by such an indicator, according to Mr. Adl.

In the same vein, the equal-weighted index was introduced in 2014/15. From the time this measure first used till the first two months of current Persian Calendar, it showed a solid 33.5% growth.

Meanwhile the Overall Index registered 8.1% dip. In other words, unlike the down cycle perceived in the market throughout the period, there existed lucrative opportunities for those individuals to forego the false signals emitted by the Index and achieve acceptable and at times unexpected returns.

Statistically speaking, in the first quarter of the current Iranian year, while the Index went down by about 9.5% and the average return resulted by 17 big cap companies dropped by 10.2% (with a market cap of above 50%), there were 131 firms in the exchange market with positive returns.

It is noteworthy to say that small cap entities recorded 21% of stock trades in the same period which is a telling testimony to the claim that the market participants were ignorant of many other names in the market.

It is also good to know that many of the giants in the capital market of Iran are notoriously labeled as “index builder” as they they are the driving forces behind market downs or ups.

To shed more light on the matter, let’s take the largest  and smallest names present in TSE as an example for the sale of clarity.

Persian Gulf Petrochemical Company which enjoys 8.4% share of total market cap and Tehran Derakhshan Company with a meager 0.003% stake of the whole market are the largest and smallest  companies in Tehran Exchange Market. As it is self-revealing, we can understand the big difference a factor such as  market cap can exert on Overall Index swings.

This is why someone who is interested in investing in the exchange market of Iran should not allow themselves to get misled by following Index movements in either directions. Rather, interested individuals should enter the market with open eyes and ample knowledge of the dynamics and fundamentals of the market.

Moreover, when studying the first quarter performance of the TSE, what actually surfaces is that most investors were unluckily focused on surprisingly just 16 names out of 321 ones available for investment in the market, according the research finds by Mr. Adl. It was so much so that half of the value of trades were single-handedly won by the big names across the market.

Moreover, turnover ratio for most traded shares has a lot to tell us. According to Mr. Adl, half of these firms experienced more than 100% turnover ratio. In other words, their shares had changed hands at least once in the market during the period.

As a live example, we can name Saipa Investment Company, with minus 9.8% return in the period. This company had the highest  share turnover ratio among the list of 16  companies most favored by the market participants. Nevertheless, the average for this ratio was 99% among  big cap firms in the equity market.

Nonetheless, the aforementioned companies’ loss ranged from minus 3.3% to minus 43.9%. The average was minus 23.5% in the period, however.

All in all, it appears that although the Tehran Stock Exchange did not pass upbeat trading sessions on the whole in the last quarter, it is evident that there are big opportunities out there. Therefore, it is the investors themselves and not just the investment environment to point the finger of blame at for the low or negative returns realized.

P.S.: All tables are taken from Donye-e-Eqtesad, published 2 August,2016

This is a guest post written by Navid Kahlor, Freelance Contributor at Al-Monitor. The original can be found here.

Equity Research Worth Paying For : A Look at Economic, Digital and Regulatory Changes

This is a guest summary post by Alphametry CEO Fabrice Bouland, of a recent senior executive roundtable about the future of equity research. You can download the full whitepaper version here.

An industry in trouble?

  • Global investment banks have seen shrinking revenues and in turn have been allocating increasingly smaller budgets to equity research. Several external factors affect revenues, among them:
  • Lower trading volumes caused by post-financial crisis industry deleveraging;
  • Fierce competition from electronic trading automation;
  • The rise of passive investing with exchange-traded funds (ETF) products rather than direct equity ownership;

Screen Shot 2016-02-07 at 18.52.24

  • At the same time, supply issues such as mid and small-cap stocks poorly covered are adding a layer of complexity to the agenda.
  • The market as a whole is also very opaque in terms of pricing and service levels.
  • The delivery of content is about to radically change. The bulge bracket investment banks are starting to move towards digitization.


  • Regulators are pushing for research spending transparency on several key areas, including:
  • Price disclosure;
  • Approved budget and reporting;
  • Forecasts of how much research to spend; and
  • Assessment of investment value versus spending.
  • Since its introduction in 2007, the use of commission sharing agreements or CSAs has gradually expanded as a tool of choice for asset managers to access independent research.
  • On the regulator’s side, it is UK’s Financial Conduct Authority (FCA) that is taking the lead on the unbundling efforts while others, like the French Authorities AMF continue its support of CSAs, only advocating to add more transparency measures.

” There is strong evidence to suggest the current model of using dealing commission to pay for research reduces transparency and creates a link between research spend and trading volume, without a clear assessment of the value this offers to investors”  – Martin Wheatley, Former CEO of the FCA, who stepped down July 2015

  • To replace CSAs, the FCA wants to implement the new Research Payment Account (RPA) scheme and will ban inducements.


  • Separating research from execution raises a simple question that will be exceedingly hard to answer: how much is research worth? In a survey from a Bloomberg Institutional Equities Event, respondents were asked what factors were the biggest challenges when valuing equity research:
  • 37% said transparency was the biggest challenge;
  • 25% said ‘a la carte’ pricing;
  • 21% pointed to pricing benchmarks;
  • 10% said disparate evaluation; and
  • 7% said regulatory clarity.
  • Pricing equity research was a hot topic in the Alphametry roundtable. Participants noted that as there have never been internal benchmarks for evaluating equity research and that the range of pricing will probably be very wide.
  • Are current investment research prices fair? Sentiments from the sell-side in the roundtable leaned towards a “name your price” approach. Some participants were interested in exploring commission-based models with various level of service.

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  • Similar sectors like digital news media are changing their entire business models because content that was once paid is now free.
  • Another factor that plays into pricing is content longevity or shelf life. Roundtable participants pointed out that some content such as sector reports could be relevant for months.


  • Regulation is converging and investment firms are building global compliance platforms applying best local practices.
  • Research is going through its digital transition phase. As more content becomes digital, the industry is focusing less on the velocity of data and more on how large datasets can be analyzed.
  • Data volume is rising exponentially. Social data, web site usage, physical surveillance (e.g. shopping center parking spaces), and connected object will all be taken into account.
  • The industry is facing its largest organizational restructuring challenge ever in building up staff experience on the technology stack and using analytics to understand clients better.
  • Distribution platforms are playing larger roles and platforms that can deliver fully digital content with integration and interactivity have the upper hand.
  • All information-intensive industries such the media will be re-intermediated.


BNP Paribas, Citigroup Global Markets Asia, CIMB Securities, CLSA, Deutsche Bank EFA, Global Equity Flow, IBT, Morningstar Asia, Nomura International, Société Générale, Shenwan Hongyuan Research, UBS

To gain deeper insights of equity research digital trends and emerging economic models, download here your free copy of Alphametry roundtable whitepaper.

Benefits of Being a Small Investor

This is guest blog post from Tom Beevers, ex-Portfolio Manager at Newton and now CEO and Co-Founder of StockViews.

Off the Beaten Path 

Throughout the financial world being large is considered an advantage – banks, brokers and insurers all benefit from significant economies of scale. But for an investor, being small offers a huge advantage. Because your investment universe is not limited to large-cap stocks, you are free to go places where large institutions would never tread. And because Wall Street ignores these investments, the chances of finding a real opportunity are much greater. Unfortunately this advantage is not always recognized or capitalized upon by smaller institutions and individuals.

In a Business Week article in 1999, Buffett explained how profitable these lesser-known investments can be:

“You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map – way off the map. You may find local companies that have nothing wrong with them at all…Having a lot of money to invest forced Berkshire to buy those that were less attractive. With less capital, I could have put all my money into the most attractive issues and really creamed it.”

Investors can be apprehensive about exploring these opportunities because they are associated with “high risk”. It is true that there are some risks specific to small-cap investment, but this doesn’t preclude an investment. You simply need to be aware of the risks and factor them into your decision-making.

Wall Street Hates Small Caps

Why does Wall Street ignore these opportunities? Largely because the big brokers don’t make money from small caps. Clients can’t trade in small-cap stocks since it takes several days or weeks to build up a position. These investments are never going to generate large execution fees for the broker. In any case, many institutional managers aren’t themselves interested in going off the beaten path. There are a number of (mostly bad) reasons for this:

  1. Fear of illiquidity. Most experienced fund managers can remember at least one disastrous investment they made in a small cap stock. They remember everyone rushing for the exit, like something out of Jurassic Worldand the pain of that memory is still etched on their brains. Not being able to exit a bad investment is something that investors just can’t stomach.
  2. The fact that the stock isn’t covered by Wall Street brokers actually scares some managers. They’re deeply uncomfortable with the idea that nobody is formally “responsible” for it (i.e. nobody to blame if it goes wrong). The idea that a stock isn’t being watched at all times just gives them the heebie-jeebies, and in extreme cases can bring on an existential crisis.
  3. More obscure stocks suffer from management teams that are less polished. They don’t have a glossy pitch deck or a quarterly roadshow and they usually mess up the earnings call (though it’s not like anyone’s listening). For fund managers used to the slick marketing machine of the S&P500, this is like going from HBO to Ukrainian State television.
  4. Fund managers hate high volatility. Many of them are so obsessed with daily movements in the stock that they get freaked out by a few down days. Eventually they sell the stock in question just so they can get a decent night’s sleep.

The Gift of Volatility

The very things that scare most institutional managers provide an opportunity for the intelligent investor.   The intelligent investor always welcomes volatility because it provides a greater chance for a stock to diverge from its intrinsic value. Without that volatility you might never get a sufficient “margin of safety”.   Sometimes with a small-cap stock, you look at the chart and it’s clear to see that a large institution has been selling down a massive stake.   In the ensuing panic, other institutions have capitulated and the price has been depressed further. This is a gift for a smaller investor, who can pick through the carnage looking for a bargain. To borrow from Buffett’s baseball analogy, this is when you swing!

Exploring the Universe

Of course finding these opportunities is not easy. There’s an almost infinite pool of small cap stocks in a diverse range of industries and it’s impossible to study all of them. A substantial amount of work needs to be done before you can conclude that the stock is materially over-priced or under-priced. This is why I’m passionate about the ability of crowdsourcing to uncover hidden opportunities. Even the largest research firm can’t hope to uncover a fraction of the best opportunities in the market. But an army of smart people all looking at stocks that Wall Street has no idea about – this is something that crowdsourcing was made for.

Small-cap Risks

Of course smaller cap companies have risks. They typically don’t have the breadth of products or depth of management expertise and they’re constantly under attack from larger competitors. However, like with any investment, these are risks that can (and must) be factored into your analysis. On the flip side, smaller cap stocks have advantages that large caps don’t – growth is easier to generate from a smaller base, and they are better adapted to change in a fast-moving industry. Financial dogma tells us that small caps must be more “risky” because they are more volatile. This is bunk – the measurement of beta is a very poor substitute for understanding the risk profile of the company. As Warren Buffett has said “risk comes from not knowing what you’re doing”.

But for a small cap strategy to work it will take time. Anomalies among small caps can remain for a long time precisely because they are not well covered. What’s needed here is something that’s in very short supply on Wall Street: Patience. While these investors are waiting for the anomaly to close, the vacuum of information leaves them vulnerable to fear and uncertainty. They crave validation from the market and when they don’t get it they begin to question if they took the wrong path. I leave you with the words of Benjamin Graham, the father of value investing:

“Traditionally the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling. If the investor is now to hold back until the market itself encourages him, how will he distinguish himself from the speculator, and wherein will he deserve any better than the ordinary speculator’s fate?”  Benjamin Graham, Security Analysis

Tom Beevers is the CEO and Co-Founder of StockViews, a platform that crowdsources high quality equity research. Original post appeared on StockViews blog.

Are investors ready for a Digital Future?

This is a guest blog post Thomas Toomse-Smith from the Financial Reporting Council. The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.


The internet and technology has revolutionised many aspects of communications; however, communications between companies and investors does not appear to have taken full advantage of this revolution.

In order to understand why this might be, and how reporting might evolve in the future the UK Financial Reporting Council’s Financial Reporting Lab (Lab) launched a project to look at digital reporting by companies. The Lab has issued its first report from this project. The report called Digital Present is based on analysis conducted by the Lab from in depth interviews with companies and investors. The interviews were supplemented with the results of an online survey of retail investors.

The report provides practical guidance to companies and highlights some areas where improvements could be made to what currently exists.

The importance of annual accounts

Annual reports remain of paramount importance to investors. However, investors prefer PDF for digital annual reports. They consider PDF not as a substitute for a hard copy, but as a progression from it. PDF provides the best mix of attributes of paper and digital annual report, but companies still could improve the PDF by thinking more about how to deliver the best experience with it on-screen.

Making sense of multi-channel

Alongside the annual report, companies use a range of other channels to communicate information Investors need to consume information on multiple companies in an efficient manner. However, company-produced tools, by their very nature, focus only on the individual company, and the multitude of channels leads to a significant proportion of them too failing to gain traction with investors.

Investors have specific feedback for companies on the most significant channels and tools:

  • Delivery of annual results presentations – Investors want multiple channels to be available (e.g. phone and webcast) preferably with supporting slides. Transcripts of the entire event, including all Q&As, is also deemed important.
  • Social media – Investors do not currently view social media as a useful channel for company produced, investor-focused information. It is seen as repetitive of other channels.
  • Investor relations videos – Many Investors are cynical about the use of video by companies. They consider them to be promotional in nature, and unfocused in aiming at many audiences. Those Investors that value them concentrate on nonverbal information such as body language.
  • Investor relations apps – Apps are not popular with investors. Many Investors find the need to have an IR app for each company prohibitive; they are concerned that this uses up space and adds clutter to their devices, especially when following multiple companies.

Investors who participated in this project suggest that companies:

  • Reduce duplication and focus development towards tools and channels which provide new or additional information.
  • Acknowledge that investors follow more than one company by making tools and channels more consistent in scope and operation with other companies, making them easy to access and locate.
  • Make the purpose of each channel or tool clear to investors, and clarify its contents.

Investors have shown they are open to innovation when it meets their needs to access information relevant to their analysis, across companies and time. To enhance current digital reporting methods and innovate further, it will be important for companies to build on the attributes of current reporting that investors identify as being most helpful.

The Lab will build on the findings from this stage of the project to inform remaining phases. In the second phase, ‘Digital Future’ the Lab will work with companies and investors to develop ideas of how companies could use digital reporting in future to improve their communication with the capital markets. Do you have views on this area? The Lab would be interested in hearing from ClosIR users. The Lab has released a survey alongside the Digital Present report seeking views from those involved in the production and use of corporate reporting. The survey will be open until the end of June and can be accessed here.

You can read the full Lab report here.

Long March Forward

Screen Shot 2015-06-08 at 08.10.58

The Saudi Capital Market Authority, under new leadership, has announced that qualified foreign institutions will have access to the Tadawul stock exchange from 15 June 2015 with the final rules to be revealed on 4 May. This comes as no surprise, given the announcement in July 2014 of plans to allow direct foreign purchases of shares in the first half of 2015.

But why does opening up the Saudi equity market matter? What could be some of the macroeconomic effects? With Saudi and other  oil exporters facing an oil price tsunami, economic policy should be directed at mitigating the negative consequences. The IMF estimates that there will be a massive loss of $380 billion in exports, equivalent to a 21 per cent hit to GDP. The expectation is that opening up the market will attract foreign capital that previously did not have access to Saudi investment opportunities. The capital inflow, in theory, could lead to increased investment in promising sectors, bring in new technology, boost IPOs, galvanise mergers & acquisitions and improve corporate governance all of which would translate into greater economic diversification and job creation, the overarching economic policy concern. The underlying risk is that asset prices get bid up, a bubble forms, Saudi investors sell and real invest does not happen.


Opening of the market comes as part of a continuing policy of opening up, economic liberalisation and gradual international integration that  has been pursued  over the past  10 years. Saudi Arabia has been successful in upgrading infrastructure, strengthening education  and skills, boosting  access  to finance for SMEs, and significantly improving the business environment. Substantial progress has been made on lowering the cost of doing business  over the years. Saudi Arabia is today the only Middle East country and only OPEC member among the constituents of the G20. It joined the WTO in 2005 (which included clauses  like allowing 60 per cent foreign ownership in banking and insurance, and 75 per cent foreign ownership of distribution  within three  years). Saudi built  economic cities and industrial zones to move away from its over-dependence on oil. But oil still accounts  for about 92 per cent of government  revenues  and though the share of non-oil real GDP has increased over the past  two decades, non-oil sector exports remain limited. Foreign investment can support economic diversification.


The conservative Saudi capital market regulator had initiated several  steps to liberalise the market  over the last  few years, including aligning working days with other  GCC and international markets with Tadawul opening on Thursdays, and improving corporate governance standards to make the Saudi market attractive to foreign investors. Draft market  access  rules, shared  in August 2014, included a 10 per cent cap on foreign ownership of the market’s value and that  a single foreign investor could own no more than five per cent of any listed firm, while all foreign institutions combined could own no more than 20 per cent. If this limit is confirmed then the promised  Saudi overture  might prove to be too timid, a damp squib.

The Saudi and other GCC stock markets are massively dominated by retail investors. Retail investors currently account for more than 90 per cent of the share trading volume of the Tadawul, while foreign investors have been restricted to buying Saudi shares  indirectly through swaps or exchange- traded funds. But retail investors may be prone to fickleness and bouts of irrational exuberance leading to volatility. Institutional investors  such as pension funds, insurance companies, and investment funds are less likely to be prone to animal spirits, or so it is hoped. Increasing the share of institutional investors should help stabilise markets.

Opening of Saudi capital markets has been proceeding in phases, initially opening up to GCC investors, then opening to investment funds and now opening to qualified foreign investors.The opening up provides foreign investors access to the largest economy and



capital market in the Middle East. Saudi Arabia is the largest economy in the Middle East, with a nominal GDP of $752 billion in 2014. Tadawul has over 160 stocks, a market capitalisation of approximately $530billion and relatively more diversified compared to other exchanges in the region, with sector representation from petrochemicals, banking, telecom companies, retail and real estate. The chart below, shows the market capitalisation and turnover of the GCC markets, underscores the importance of the Saudi market: Tadawul alone accounts for more than 50 per cent of the market cap of the GCC countries and is the most liquid.


Saudi’s ouverture finally allows foreign investors to diversify risk and gain exposure  to GCC investment opportunities through UAE, Qatar and now Saudi markets. Indeed, it is only in the past  year (May 2014) that  both UAE and Qatar were reclassified from Frontier to Emerging Market Status by the MSCI. MSCI considers  both size and liquidity requirements and market  accessibility  for its country classification  into Frontier or Emerging. The former are based on the minimum investability  requirements while the latter are based  on qualitative measurements that reflect international investors’ experience in investing in a given market, including laws, rules and regulations that provide for investor protection.

Will Saudi Arabia go through this process of a reclassification as well? According to MSCI, based purely on the existing size of the Saudi market, Saudi Arabia would have an equivalent weight of about 63 per cent in the MSCI Frontier Markets index, and about four per cent in MSCI Emerging Markets – the inclusion would attract passive foreign institutional  investors  or index investors that would have to rebalance their portfolios to include Saudi. The index house has already stated that a market does not necessarily need to pass through frontier status before entering the Emerging Markets universe. The earliest Saudi Arabia could officially enter either the frontier market or emerging market (more likely) would be mid-2017 considering the usual timelines for the evaluation and consultative process. Saudi Arabia, at present, has a standalone classification from S&P.


What can Saudi Arabia look forward to with the opening up of its capital markets and subsequent foreign investment? Opening the stock market is only one step in what ought to be a Saudi financial markets development strategy. Efficient financial markets require breadth (a wide variety of financial securities and instruments), depth (sufficient size to enable transactions without leading to large bid-ask spreads) and liquidity (ability to enter and exit markets without affecting price).

Saudi needs active money markets, bond and Sukuk markets, and a mortgage market  for housing finance. Saudi Arabia should however use the opening up of its capital markets to encourage more listings of both Saudi and GCC companies (dual listings). The exchange is largely dominated by energy-related companies and financial firms. It is necessary to reduce the high concentration of capitalisation in a limited number of stocks: for example, the top FIVE names (including SABIC and Al Rajhi Bank) account for more than one-third of Tadawul. Developing the financial markets should also be part of a strategy of economic diversification, via attracting capital into promising sectors such as tourism and hospitality, transport, education, health, services etc. but the time is also opportune to start a programme of privatisation e.g. Saudi Airlines and greater PPP in infrastructure and logistics.


The ouverture of Tadawul should be part of the equivalent of a Chinese ‘Long March Forward’ of a continuing modernisation and reform strategy and of greater regional and international economic integration. The move should be a harbinger of further reform providing wider market access and establishment of foreign companies and persons via deep legal and regulatory reforms,public private partnerships,and privatisation and labour market reforms to create a dynamic,vibrant economy able to create jobs for generations of young Saudis, both women and men. But why stop there?

As the region’s biggest economy, Saudi can and should be the region’s engine of growth. Given Saudi’s massive wealth and being a major capital exporter, the Saudi market should be open to foreign listings (including government and corporate bonds and Sukuk) and cross-listing from the other GCC and Arab markets. An example would be allowing Egyptian companies  and government  to list equity, bonds and Sukuk that  would help finance Egypt’s infrastructure, inclusive economic growth and development.  Finance and trade are better than aid! Saudi’s Tadawul should move away from being insular and inward–looking to become a regional market helping finance economic growth and development across the Arab world and wider region.

This is a guest blog post by Dr Nasser Saidi. It originally appeared in CPI Financial


How Do You Say “Information” in Over 100 Countries?


This is a guest post by Josh Ellwel, Partner at ValueStream Labs in New York. The post originally appeared here.

Professional investors are constantly in search of superior investment opportunities, and this of course requires access to superior information. And although we have seen an explosion of research and data in some areas, there’s still a confluence of issues that limit access to information on companies in the emerging markets.

The number of funds looking at emerging markets has exploded, from several hundred firms ten years ago to nearly 4,500 today¹. One might think this would be accompanied by an increase in emerging market research coverage, but wide gaps persist. Take a country like Russia for example: only 37% of companies in the MICEX-100 are covered by at least one of the top ten global sell side research departments. And even when including research by local banks, 27% of those companies are still only covered by two or fewer analysts².

And this situation is not likely to improve. Equity research is generally viewed as a cost center, and since the businesses it supports within an investment bank are suffering from declining margins, it’s no surprise that budgets for many research coverage areas have been cut (apart from some hot areas of interest like China and technology, of course).

This is why we are happy to announce ValueStream’s newest addition to our Development Lab Program, and our first investment outside of the US:Closir Ltd.

Closir, a London-based startup, is aiming to fill the gaps in emerging market information and data. At its core, Closir is building a platform for investors and publicly traded companies to interact and exchange information in a more efficient manner. The greatest inefficiencies currently exist for companies in and investors targeting emerging markets, and so Closir’s initial focus is on servicing these two groups.

For companies, Closir provides tools to easily manage Investor Relations functions using industry best practices, including information dissemination, investor communications, scheduling, new investor discovery, uncovering information on a company’s existing shareholder base, and so on. This provides firms with a technological alternative to some of the functions traditionally performed by an Investor Relations consultant, at a large cost savings.

For investors, Closir’s platform aids in the research and discovery of investment opportunities by providing access to accurate and valuable supplemental information supplied by the companies themselves, and by making it super easy to schedule corporate access meetings and calls.

I know firsthand from my experience as an analyst in the hedge fund industry that there are excellent investment opportunities to be uncovered in emerging markets, but getting to the information is rarely easy. And the lack of research analyst coverage isn’t the only issue. Emerging market investors must overcome language barriers, differences in customs concerning shareholder communications and Investor Relations best practices, and unfamiliar legal/accounting regulations. We believe Closir can become an integral part of the solution to each of these barriers over time.

Closir’s experienced founding team, consisting of Michael Chojnacki, Andre Powers, and Tim Greer, has firsthand experience in the Investor Relations consulting industry, at firms including BNY Mellon and Grayling. They quickly realized how technology could enhance the processes they were performing manually, and left to launch Closir in August 2014. We are looking forward to helping the team push their vision forward over the coming months and years.

Closir will officially launch its platform in Summer 2015, and at that time we will be sure to publish a more detailed description on how you can use Closir in your own workflows. But in the meantime, we would love to hear from you with your thoughts and suggestions on how to make this product most valuable to you. When launched, the Closir platform will offer significant benefits not only to Investor Relations teams and buy side investors, but also to many other participants in the capital markets, including:

  1. Emerging market stock exchanges seeking to enhance their visibility with foreign investors,
  2. Sell side research departments looking for help in increasing their coverage universe in the face of declining margins, and
  3. Financial media outlets wanting to broaden their coverage of emerging market trends and data.

It’s easy to get in touch with us here. We look forward to hearing from you.


1: Calculated by Closir management using data from Factset

2: Calculated by Closir management using data from Bloomberg

Saudi Arabia to Open its Equity Market to Direct Foreign Investment

         Saudi Arabian banknotes & coinsAfter a number of years in the making, the Saudi Arabia authorities finally announced last week that Qualified Foreign Institutions (QFIs) will be allowed to invest in shares listed on the Tadawul starting from June 15th, 2015. While foreign investors have been able to invest in Saudi Arabia since 2008, this has been limited to ETFs, swaps and P-notes, none of which allow direct ownership of the underlying equity. Opening the market to QFIs as a first step is a tried and tested approach in emerging markets (e.g. China in 2002, India in 1992, Taiwan in 1991). Institutional investors who do not meet the criteria for investing directly will likely continue to use the existing products mentioned above.

The Tadawul is the Middle East’s largest and most liquid market, and effectively the largest closed emerging market today. The 165+ listed companies have a combined market capitalisation of over $550bn, with petrochemicals and financials industries the dominant sectors. Recent IPOs have added more consumer and non-cyclicals to the market. A number of commentators are speculating that Saudi Arabia could receive an emerging market classification from index provider MSCI within the next two years, which is in turn likely to drive additional investor interest. MSCI’s Sebastien Lieblich was quoted last year as saying that if Saudi Arabia were added to the Emerging Markets Index it would constitute around 4 per cent of the total market, similar to Mexico and Russia. This development would mean that Saudi Arabia could make it into the top 10 rank of EMs as classified by the MSCI (see graph below).

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The Kingdom presents investors with a unique set of dynamics. Its economy has gone from strength to strength in recent years as it has benefited from high oil prices and output, strong private sector activity, increased government spending, and the implementation of a number of domestic reform initiatives. Rising oil prices and oil production have also resulted in large external and fiscal surpluses, and government debt has declined to almost zero. With a population of over 30 million, over half of whom are under 25 years old, it is the region’s youngest and most populous nation. Of course, there are risks. First, the Kingdom’s dependence on oil revenue (over 90 percent of fiscal revenues and 80 percent of export revenues come from the sale of oil) leaves it hostage to fluctuating oil prices, as have been seen since the summer of 2014. Geopolitical tensions in the region further added to such worries.  As with all emerging markets, there have been some corporate governance-shaped bumps in the road, however the opening of the market to foreign investors will undoubtedly help smooth the path to transparency and benefit companies and investors alike.

Sources: International Monetary Fund, Bloomberg, Morgan Stanley, MSCI