01 July 2008

IR in times of uncertainty

In times of uncertainty, many companies' share price are swept along by the tide of market sentiment rather than determined by business fundamentals. While companies lament the negative market sentiment, are they taking the right approach to communicating their investment merits to investors?

Listed companies need to make themselves heard to investors, not only when there are major success milestones, but also during periods of uncertainty. During turbulent market conditions is when investors separate the wheat from the chaff, and this is when companies must define their continued investibility through investor relations.

In the face of uncertainty, investors are inclined to sell, and they will query the company's business model, assumptions and prospects more intensely. Therefore, companies must explain their investible proposition more actively to investors and shareholders.

With impending gloom on the horizon, the sell-side would like to sustain a positive investment climate for as long as it can, rather than allow sentiment to dictate the market, especially when they believe that company fundamentals are still intact. But it doesn't help when investors are in an apprehensive mood, and companies are merely standing by in the face of uncertainty, waiting for events to unfold.

The sell-side relies on companies, specifically the IROs of companies, to define the extent or impact that a downturn will have on the company's business. Otherwise, the company's shares may be over-sold, and internal business plans can become derailed. IROs need to play their part in bringing appropriate confidence to the market and reassure shareholders to remain loyal to the company's shares.

As IROs, you need to engage the sell-side and other members of the investment community regularly, giving a balanced view of your business performance and prospects, so that investors continually understand your investment case, all the more when there are uncertainties in the market.

As they say, in every crisis there's an opportunity. An imminent downturn may present an opportunity for some companies to stand out from others. Companies should continue their IR efforts and allow the market to judiciously decide how it will value the company.

Often, we find a peculiar situation occurring with the onset of bull and bear markets. When economic conditions are favourable and companies are enjoying good business prospects, often they say there is no need to do IR, as results speak for themselves. On the other hand, when there is an economic downturn, they bemoan that there is no point in doing IR as the market will not respond to their efforts.

Indeed, we do not believe that this line of thinking is valid, as we see IR having a positive effect on companies' corporate and capital standing in matured markets in developed countries. Whether the glass is half full or half empty, we believe companies must continue their IR endeavours. In fact, during uncertainties or at the tipping point between a bull or bear market, is when companies must distinguish themselves through investor relations.

MIRA's 1st Birthday

We recently celebrated our first birthday, at a nice event on 20th June. In this span of one year we have had numerous seminars and learning events. Most of our events are quite oversubscribed which, to me, means that our members are keen to develop their knowledge and understanding of IR. This is what we set out to do in our first year - to raise awareness of IR and to develop knowledge among IR practitioners.

Now that we're in our second year, we will be stepping up our efforts and bring to you a number of new things. We will announce new initiatives as we roll them out.

On the 20th of June, we announced two initiatives aimed at developing and promoting IR as a profession and career choice.

Certificate in Investor Relations

Firstly, we will be introducing training and examinations, leading to the Certificate in IR. This is in collaboration with the Investor Relations Society, MIRA's counterpart in the United Kingdom. They are highly regarded as a premier IR body in UK and Europe. 80% of companies on FTSE 100 are IR Society members.

We are proud to be able to offer the same quality of professional development as enjoyed by IR practitioners in the UK, to our members in Malaysia. This certification will allow IR practitioners in Malaysia to elevate their standards and benchmark against established international best practices. At the same time, it will help listed companies identify capable IR professionals, to staff their IR function and enhance the quality of their IR practice.

IR Career Development Programme

Secondly, MIRA will be working with JobStreet Corporation Berhad to implement an IR Career Development Programme. We will conduct career talks at selected institutions of higher learning to expose graduating students to the IR profession. This programme will augur long term benefits, of nurturing a growing pool of capable IR officers to support the IR function of listed companies.

Membership renewal

MIRA's one year free membership has come to a close. From now onwards, membership fees are applicable for continued membership. In order for us to continue bringing you various IR development activities and initiatives, we rely on your membership and participation in our association. I hope you will agree that membership provides listed companies and IR practitioners many opportunities for development and cooperation, towards our common goal of elevating IR practices.

Finally, I wish to remind members who have not renewed their membership, to do so this month.

Eddie Razak
July 2008

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