Recent rounds of stock listings bring with them a growing base of smaller investors
For a variety of all their methods, private investors have many common guidelines.
Many small investors tend to have a home country bias; they generally shun activist fund managers, instead trying to do the job of stock picking themselves. Or, alternatively, invest in ETFs (exchange traded funds).
Finally, they frequently establish predetermined selling points at which they will sell to either cash in their profits or cut losses. As more people start calling the UAE their home, that ‘home country bias’ is starting to change – it changed first in the real estate market – the desire of so many investors to make their own decisions.
This has led to a boom in trading and secondary market liquidity, as well as for stock brokers (as it did for real estate brokers). It is also sparking a boom for private sector companies to list to raise money and pursue their expansion strategies and/or strengthen balance-sheets.
Onward into IPO ways
In the last few weeks, there have been announcements from supermarkets to crypto firms to announce their intention to float. This is the virtuous cycle, where privatization sparks interest in the primary markets, and which disseminates into secondary trading and the resultant increase in liquidity attracts private sector companies to list.
This is the virtuous cycle, where privatization sparks interest in the primary markets, and which disseminates into secondary trading and the resultant increase in liquidity attracts private sector companies to list.
Investcorp Capital is the latest addition to the portfolio, a premier and experienced investment bank with a stellar worldwide track record that offers investors a chance to participate in the upside potential for all the deal-making that has been making headlines throughout the region in the past few years. And help them navigate the new complex world of finance with higher interest rates and an emphasis on cashflows.
In a world where big institutional investors seemingly have all the advantages of research, resources and speed (accounting for more than 70 per cent of average daily volume), the small investor has been more likely to sit tight with chosen stocks. This used to be the case in the 1980s, before the day trading phenomena took over global markets, fueled by ‘meme’ stocks and the ‘new new thing’.
But real estate investors in the UAE led the way in terms of constructing their own portfolios in a bottom up manner, using their own tools and tricks. In the post-Covid world have navigated the landscape adeptly. Of course, the relentless bullishness of the current cycle has helped, but it has also in certain cases caused a queasy altitude sense, which has allowed many to pivot.
It is the same impulse that has caused the increase in appetite for domestic capital markets, as evidenced by the increasing volumes on DFM and ADX.
It is the same impulse that has caused the increase in appetite for domestic capital markets, as evidenced by the increasing volumes on DFM and ADX. The evolution of the domestic capital markets may have taken a back seat relative to the real estate markets, but it is exactly for this reason we have seen more attractive valuations in the same markets. And caused individual investors to put their money where their mouth is, despite the disconcerting gyrations of the market.
Investcorp Capital IPO sets a marker
Many of the smaller investors have been inspired to march to a different ticker, focusing on lower volatility stocks, or looking at companies that have been overlooked. Many such companies have ignored by the media, but the increase in volumes in Gulf Navigation, UPP and Amlak , as well as the more defensive plays such as DEWA, Salik, Empower, and ADNOC group entities has shown a level of astuteness not associated with short-term trading.
The Investcorp Capital IPO is another clear marker for ushering in a new age of market level maturity. The ability of fund managers and investment banks to allow individual investors access to institutional level deals, similar to the times in American markets when blue-blooded investment banks like Solomon Brothers and Goldman Sachs went public.
As deal-making accelerates, capital markets in the UAE will move center-stage as they did in other money center cities. The biggest advantage right out of the gate is the fact that they are starting from a point of lower valuations.
This, more than anything, will define the zeitgeist of the era, led, of course, by the small investor.
Sameer Lakhani
The writer is Managing Director of Global Capital Partners.
