So it’s official. As of late March, the world’s capital markets entered into territory uncharted in almost a generation – bear territory. Opinions vary on the severity and permanence of this latest decline. Some market watchers believe the drop has been too rapid, and that the world’s stock exchanges are gearing up for an almighty bounce. Others are more pessimistic, muttering darkly about the Nasdaq falling until it reaches 500.
The going has got tough, and it’s time for the tough to get going. This month’s cover story, (Fighting gravity) looks how IROs can ride out the market storm, examining the ways IR professionals can make the best out of the current market turbulence. Sure, things aren’t as easy for IROs as they were a couple of years ago – when your stock was delivering regular growth and dividends, investors were generally a happy bunch.
But in recent months some sectors, such as technology, seem to be taking battering after battering on the bourses. Having coveted and courted these firms for years, the markets turned on the tech sector, and companies that were the darlings of the market have found the last year to be nothing more than a succession of brutal hammerings.
It may be tough going, but it is at times like this when IR can really prove its worth, when IROs start really earning their wages. Just as for some of the more youthful members of the investment community, a fully-fledged bear market represents uncharted territory for investor relations.
IR has developed rapidly in recent years, and the IR community has welcomed many new recruits to its fold. But, excluding North America, the profession as we know it has developed during a near permanent bull market. Ignoring the 1987 crash, the major equity markets have been on a long bull run since the early 1980s, providing an ideal climate for nurturing IR.
Past experience of serious market setbacks in other countries does not bode well for the future of IR. Many Asian companies disposed of their IR operations during the financial crisis of the late 1990s, deeming investor relations a luxury that they could ill afford to maintain. Only now is IR in markets such as Hong Kong and Singapore recovering to pre-crisis levels.
Investor relations in many countries has not yet been truly tested by a serious market downturn. Whether the recent falls represent a long-term cooling of the investment climate remains to be seen. Given the ever-present day-to-day volatility, by the time you read this the world’s exchanges may have pulled themselves out of the mire and continued on their upward trajectory. If not, we may be about to witness how IR copes with a major market downturn, the kind that the profession at its current stage of development has never before faced. Will the bears rip into IR? Hold onto your hats – we may be about to find out.
