Abu Dhabi Securities Exchange Announces Investment Literacy Index And Market Sentiment Index - ADX Seeks A Sustainable Solution To Improving Investment Literacy And Today Announces The Results Of Its Survey As Part Of Its Ongoing Stakeholder Consultation

Abu Dhabi Securities Exchange (ADX) today announced the introduction of its Investment Literacy Index and Market Sentiment Index. In early December ADX issued an E-questionnaire to assess the investment knowledge and understanding of ADX active and early-stage investors and the results of the survey have been used to derive an ADX Investor Literacy Index and a Market Sentiment Index. The questionnaire contained 2 sections, one posing questions to assess investors’ knowledge and openness to fraud and risk while the second aimed at analyzing demographics, investment patterns and market sentiment. The literacy survey is based on answering 17 questions and the respondents are not provided with the correct answers or their overall score since it is planned to repeat the survey in the future, and to assess any improvement or deterioration in the results. In the first phase of this innovative project, the survey ran from 8 December 2009 to 28 December 2009, a total of 20 days.

Nearly 1700 investors participated and a massive 94% completed the survey; a very good result. This is the first stage of a long term strategy to address investor literacy. ADX is very grateful for the support given by investors and has received responses from all Emirates, all GCC countries, as well as responses from the US, Canada, Europe, Asia and Australia.

The Abu Dhabi Economic Vision 2030 sets out concrete steps for economic and societal development. As a key part of its strategic plan, ADX has engaged with investors, as key stakeholders of the Exchange. The survey results which establish the Investment Literacy Index and Market Sentiment Index will form the basis for directing ADX’s market awareness and education programs. Although the survey initiative has just been completed, ADX is already assessing is current market awareness approach and considering new plans of action.

Rashed Al Baloushi, ADX Deputy Chief Executive, said, “We are delighted to have completed the first phase of this innovative project in an ongoing campaign to improve investor literacy. This we believe will make a substantial, long-term contribution to the development of Abu Dhabi society; one of the main driving forces of the Abu Dhabi Economic Vision 2030.

The use of indices form a solid benchmark on which we can plan as we strive to improve our relations with key stakeholders and support the Abu Dhabi Economic Vision 2030.”

The policy, survey questions and methodology were designed within ADX. The structure of the questionnaire had to reflect the timing, coming immediately after one of the biggest global financial crises in history. ADX also wanted to understand more about investor demographics and consult them on their investment approach while assessing market sentiment. For these reasons ADX managed the program internally. The survey has produced a large amount of useful data which will take time to sift and review and as such it is too early to announce concrete plans of action.

Indeed the investor literacy survey and index are part of an overall marketing assessment program, which includes satisfaction surveys, spanning key stakeholders, for example, brokers, listed companies and investors.

ADX believes the literacy survey findings will be of major benefit to schools, colleges and universities, as well as accredited training bodies operating within the region, since it will guide them and allow them to contribute to societal development via a careful review of education and training curricula.

The survey and calculation provide the following index:

A more detailed analysis is set out in Addendum 1; this shows the percentages of respondents giving the correct answer as well as providing preliminary focus areas for market awareness and education; these are highlighted in red – percentages highlighted in green show answers that provide more comfort.

This is the first time that a benchmark has been set for this important subject; ADX is not aware of any emerging market which has combined the need for surveying demographics, market sentiment and literacy. ADX considers this index of 52.92 to be a very positive sign since as will be seen later the demographic profile of respondents is wide in terms of age, gender, geography and income level – see Addendum 2 below. The analysis provides clear pointers for improvement areas and ADX believes this is an excellent result on which improvement programs and targets can be established.

In essence investors demonstrated good knowledge of equity markets, expected return on investment, risk awareness and general responsibilities with regard to authorities. Investors were less sure when it came to bonds, derivatives and funds.

The second ADX index derived from the survey assesses market sentiment during the severe global financial crisis. ADX solicited investors views about the market, posing questions to understand how they viewed the market going forward. ADX calculated the ‘market sentiment index’ whereby an index of -100% would indicate that all respondents would view the market as decreasing, zero% would indicate they expected markets to stay the same and +100% would indicate that markets would increase.

The survey and calculation provide the following index:

The market sentiment indicates that a large percentage expect market growth in the next 12 months.

The detailed analysis of the market sentiment index is shown in Table 1. ADX has evaluated this as a ‘market sentiment index’ where -100% would indicate that all respondents would view the market as decreasing, zero% would indicate they expected markets to stay the same and +100% would indicate that markets would increase.

Table 1

ADX has moved quickly to publish the findings of its innovative survey to formalize its consultation process and allow as many constituencies as possible to benefit from the survey results. As part of its ongoing consultation process, ADX will cooperate with universities, colleges and accredited training bodies to help them align their education curricula and training programs to meet the demands arising from the Economic Vision 2030 which aims to make Abu Dhabi a regional financial centre.