Daman Securities invests for the future

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Shehab Gargash, CEO Daman Investments.

Daman Securities has struck a deal with international equity research firm Morningstar, to begin coverage of 27 UAE stocks. The data, which will be available to Daman investors through the firm's trading portal, marks Morningstar's first venture into the Middle East.

Equity research is notoriously scarce in the Gulf markets. Is the Morningstar deal a step towards changing that?

Their entry into the Middle East is a very positive step for our markets. Bringing in the expertise of a company like Morningstar means we have a neutral party that is looking from the outside in; and it's a party with the know-how and reputation to do a good job. While the markets have seen a steep decline in 2008, there has also been an increased level of [investor] interest.

The Middle East has become one of the important destinations for fund managers worldwide seeking emerging markets exposure. What we need is a concise but informative [research] product, which is where Morningstar comes in.

There hasn't always been a culture of transparency among Middle Eastern companies. How do you intend to address this potentially thorny issue?

There's been reluctance in the past to accept research here as independent, which is the reason we've partnered with an independent party. It's not our opinion on record in the reports, it is Morningstar's.

Globally, no market is transparent enough. It's a tall order... [but] if we have something to say, we will say it.

This is a step towards solid information in the marketplace, but it's important the investor educates themselves. No one will force-feed them information. If he's going to invest on a whim, nothing will stop him.

How did your funds fare in 2008?

Two of our funds - we have three focused on the UAE markets - have been hit along with the markets. A lot of them have moved to cash. We still performed better than the market, but obviously one that is reflecting the significant negative results seen in 2008.

Our third fund, the Speculator Fund, has been designed for an environment such as this. We're very pleased that, although the Dubai market has dropped by 72 percent and the UAE market by over 50 percent, our fund is up 4 percent. It launched in the summer of 2008 so we had half a year, and the worst half of the year, but we were able to remain above par and go against the market and this negative trend.

All three funds have an upper limit of $54.4m each. We purposely keep our funds fairly small as it enables us to be agile, and that agility is most useful in an environment such as this.

What moves are necessary to steady the markets now?

There are so many unknown factors and it is still very unclear as to where we are headed. The root of all solutions is a return to normalcy. The first step towards that is to get our banks working again - our banking system has taken a holiday. Our banks need to get back into the business of making money revolve through the economy.

In terms of the economy [the government] has a duty to interfere. And that isn't just a GCC issue. The biggest government intervention we've seen has been in the so-called free market economies of the US and Europe. Once your national economy is in peril all bets are off and you do whatever is necessary to get it back in shape. That includes, at the forefront, government intervention.

Do you expect to see market recovery in the first half of 2009?

I was asked before 2008 what I thought the year ahead would hold and I said I was cautiously optimistic. This year I am more cautious than optimistic. It could be a bumper year or a dismal year. It's premature to think we've hit bottom because the market is down 72 percent.

We hope we have, but I think there is a bigger crisis than that - the liquidity crisis, the crisis of confidence. Still the markets are usually the first to reflect problems but they are also the first to respond to solutions. So we are looking forward to some very stern and resolute actions.

For us, it is business as usual, only our priorities have changed. We'll continue to forge ahead with our products - our association with Morningstar is an example. This year we will see a major earthquake in our industry, which will undoubtedly leave some rubble. But whoever is still standing will stand stronger, and we hope to be among them.

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