The post-Covid craving for investments and security together with anxieties about rapid technological change in the global marketplace were ideal purgatives for Dubai’s leadership, which moved quickly to galvanize capital market activity through a series of companies that will be listed.
These announcements have been followed by private sector companies that are seeking capital of their own, if only it would be digested by the ‘Street’. This rethinking of the marketplace in order to attract and harness global capital will bolster the confidence of institutional pension funds as well as insurance companies, releasing them from the ‘prudent man rule’ that demanded that every stock be purchased free of speculative taint.
Just as real estate captured the imagination of the investment public, so too must the capital markets. One of the first steps is to offer what are commonly referred to as ‘one decision’ stocks : you buy them once and hold on to them forever. The names of companies that have already been announced – such as DEWA - certainly fit that criteria, with many more in the offing.
Notwithstanding the excitement, there is clearly some amount of skepticism that needs to be overcome as these are early days of capital market reform. It remains to be seen how these play out as companies stampede towards listing themselves.
Keep an eye out
For one, Covid jitteriness is still around, and there remains some fear about the next wave that could yet impact economic activity. At the other end of the spectrum, inflation having reared its ugly head poses a threat to both sentiments and capital market values, especially when interest rates start to rise.
Of course, at its base is the nagging doubt about the shallowness of the market with little liquidity and an investor base that has remained virtually the same over the last decade. Whilst these concerns are legitimate, there is a sense of security and permanence gained by the ownership of these stocks, which almost allows for the ushering in of the ‘Decade of the common man’, a form of democratic capitalism that enables wealth building of the sort done in Western capital markets without the wild gyrations in times of downturn.
Market-making opportunities, as well as incentives for listing in the tech and fintech areas, will allow investors to choose from a buffet of risk profiles, from the most conservative dividend bearing stocks to the frontier investing that currently dominates the zeitgeist in the West. The key variables here are liquidity, opportunity and diversity.
The market reforms introduced tick off all the above boxes and then some. It is imperative to remember that American capital markets went through the same period during ostensibly what was one of the greatest period of wealth generation, after the culmination of the Second World War. All of this is just another way of stating the obvious fact, which is that precious few recognize the changing of the structure in markets.
A chance to join in
More importantly, that one need not be the pioneer who discovers the gold. All that needs to be done is to jump on the bandwagon.
Capital markets have to be a critical nodal point, whereby financiers, entrepreneurs, real estate developers and lawyers are inherently perfect go-betweens, moving gracefully between economic and social realms. It remains critical for this latest wave of the shareholder revolution that the interest of the small investor is taken into cognizance, especially for the ‘mass culture’ to develop.
This is precisely why the offerings from the government will act as a catalyst for investor confidence, spurring activity as has previously been stimulated in the real estate markets. Soon enough, the twain shall meet, and this time it promises to be synergistic and symbiotic as asset values continue their rebound.
After a prolonged period of time where capital markets have been viewed with an admix of opportunity as well as anxiety, the current wave of reforms have made the entire country (and the region) sit up and take notice.
