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The aim of good writing is to briefly put the handcuffs on history, arrest time, and stop movement.
Similarly, the aim of good regulation is to take that moment of stillness and make the silence breathe so that it gives way to beauty, by facilitating ease and access, such that in years to come, when a stranger comes along, he or she can instantly recognize it as an inflection point.
This is the privilege of good governance - to come alive as a body and change the course of events. The DEWA IPO is one such moment, where investors, large and small, go past the debate of whether to invest but rather how much. Regulations in the backdrop that have facilitated access to markets, both public and private (from crypto to startups) lead to the fundamental question of wealth creation.
Capital allocations change, as do the course of markets. It is the best possible position for detective work.
Take on real estate
The sea change in the capital markets, sparked by the DEWA IPO, has put forth the fundamental question of whether savings need to be allocated to public equity markets, whereas in the past, that distinction was reserved for the domain of real estate. Long serving as the role of generating cashflow income streams, the era of near zero interest rates, combined with rapid urbanization led to the tantalizing prospects of capital gains that millions have enjoyed.
Capital markets, by contrast, have had a rockier time, and given that skepticism, the current buoyant mood is a marker for how far the zeitgeist has moved. To be sure, access to the capital markets was historically considered a riskier alternative. Real estate was the bedrock for the formation of capital generation, whereas equities was for the more speculative class.
A magnet for savings too?
As private markets started to flourish, the opportunistic mindset moved in the direction of startups and crypto currencies, but the small investor remained confined to investing in the real estate markets - both ready and offplan - as a way of putting their savings to work. That era has now come to a close, where regulators have been present to answer questions about a phenomenon, which even a couple of years ago, would have been considered material unfit for serious discussion.
By putting in a framework where blue-chip companies, with guaranteed dividend income streams where being offered, against a tumultuous backdrop of rising interest rates and global volatility, the conservative small investor monies was suddenly on the table.
If in the process the event seems unreal, it is only because of the polite unreality of the questioning. The post-Covid era was like a youth who was standing awestruck at the altar.
To be followed in quick succession by other stellar companies such as Empower, Salik, and Tecom, along with market making funds that will stabilize market movements, the calculus of savings allocation has decidedly shifted in favor of capital markets, which, in comparison to those in the West, looks to be a bargain and then some.
Long-term horizons
To be sure, there will be some hand holding required as investors continue to make the change, but it is equally clear that the fuse has been lit. Capital markets investing has arrived in Dubai, and alongside the investment for one’s house, will serve as the foundation stone for wealth accumulation and generation, especially for the conservative investor.
In 1939, Jorge Luis Borges published an essay in which he pictured a ‘total library’ containing every possible book, a theme he called ‘La Bibliotheca de Babel’. In the investing world, Dubai has created that bibliotheque, offering a plethora of options for the conservative as well as the opportunistic investor.
The book long missing was the lingua franca of the conservative investor, who had to look abroad for a more stable set of returns. The DEWA IPO (and the ones lined up after it) have ended that struggle, and have instead replaced it with a competitive series of investment alternatives, where capital market investing will serve both as a competitor and as a complement to that in real estate.
Regulation, which unleashed the revolution of freehold asset ownership in 2002 has similarly unshackled the handcuffs of capital markets investing and arrived at a watershed moment in 2021. Like the markets before it, this move will now decidedly bolster the formation of a new middle-class.
