Stock value influenced by media, says expert
Dubai, March 3, 2009
The more favourable the media coverage of a company, the better will be the price of the stock, says the CEO of an award winning media intelligence company.
Mohamed Elzubeir, CEO and founder of Mediastow Media Intelligence has stated that media coverage has serious impact on UAE stock movement.
"The influential role of media was never stronger in the UAE,” said Elzubir. “Our studies show that mass media manipulates the value of stocks in the UAE. Stock markets are often driven by psychological factors and not by rationale behavior, which opens the door wide for media control."
“The rise and fall of stock markets is somewhat linked to how favorable the UAE media is to a company," the CEO observed.
The media role in stock fluctuation has been exposed in a study conducted by Mediastow to analyze the media coverage of the UAE real estate sector, with a focus on Al Qudra Real Estate, Aldar, Emaar, Sorouh, Dubai Properties, Nakheel, Sama Dubai and Damac.
A total of 4,700 articles from 125 publications were monitored throughout the fourth quarter of 2008 to evaluate stocks movements of Emaar, Aldar Properties and Sorouh and correlated with media coverage.
The correlation serves as a measure of the media’s impact on stock performances for the property developers.
A comparison of the facets of coverage (share of voice, coverage size, impressions and ad values), penetrations, content analysis (messages, message types, public relations influence and reputation drivers) were featured in the report. The report also contains an analysis of the real estate sector to put the performance in perspective.
An evaluation was then undertaken, based on the abovementioned variables, to assess how media coverage varied with time and how it stands in comparison with each other.
Elzubeir added: "Very interestingly, Aldar and Sorouh jumped in Raves values in December 2008, while the remaining property developers remained somewhat steady. This can be attributed to the global economic crisis which has affected Dubai’s property development sectors more than Abu Dhabi."
The stocks of Emaar, Aldar Properties and Sorouh were observed and correlated in this report. Abu Dhabi’s property developers’ stocks did not fall as sharply as Emaar’s, Dubai’s largest property developer.
This is directly due to global economic crisis and the credit crunch. While Aldar took the lead, followed by Emaar and Sorouh in terms of stock price at the beginning of October, it was Aldar in the lead, followed by Sorouh and finally Emaar by the beginning of January 2009.
While Aldar and Sorouh’s stocks began moving upwards from mid-November to December 1, 2008, Emaar’s stocks saw a drop during that period.
Aldar penetrated powerful and positive messages in that period, such as confirming that it has enough financing to cover its current project list and its ability to trade on single stock futures.
Aldar Properties also announced that it did not plan to dismiss any employee. Sorouh too said that it didn’t plan to dismiss employees and even sponsored many events, such as the Sorouh endurance challenge and the monumental art garden.
Emaar, on the other hand, had many clippings on its new employment strategy as well as on Emaar rethinking its projects in the light of the global economic crisis. Emirates NBD suspended banking services to employees of Emaar.
The property developer canceled some projects, did not release its full financials for the third quarter on the market site and reviewed its project pipeline and considering further job cuts.
Elzubeir added that based on the coverage of Emaar, Aldar Properties and Sorouh from November 14 to 18, the fluctuation in their stocks, reflected in an upward movement for Aldar Properties and Sorouh from November 15 and the downward movement of Emaar’s stocks from the same date could be correlated.