Suresh Kumar

'May be somebody with a pole will try to vault over the wall,' suggests Suresh Kumar, general manager of Emirates Financial Services, a seasoned observer of the UAE stock market. 'However, I would much rather see a gradual recovery than another boom to bust cycle'.

In his role as one of Dubai's top investment bankers, Mr Kumar is constantly advising his clients on the correct financial structures for their companies. At present he would like to persuade more of them to take the plunge and launch themselves on the Dubai Financial Market.

'It is a chicken and egg situation,' he admits. 'Nobody is very keen to do it until somebody else does. But we believe that debt-to-equity ratios need to be sorted out in this market, and many groups would benefit from the discipline imposed by a market listing.

'On the other, hand we are also advising groups which have too much equity, raised when stock market conditions were much better. For them the problem is that equity comes at a cost, and they have shareholders demanding bigger returns to justify their risk premium. Here debt would be easier to service than shareholder capital'.

Mr Kumar speaks in the cryptic language of the professional banker who can not mention his clients, but to those who know the Dubai market well, it is clear enough to whom he is referring. And he has long been an advocate of share buy-back schemes which allow cash-rich quoted companies to enhance shareholder value by purchasing their own shares.

What seems to be missing from the UAE stock market is confidence. For local interest rates have fallen without pushing up the value of local shares which carry attractive dividends. And profits so far this year have been really good, again without affecting share prices.

'How do you get confidence back?' asks Mr Kumar. 'Trading volumes are very small and that questions the quality of pricing. For can a share price really be determined by such a low level of share trading? But at some point the 'feel good' factor must return to the UAE market?'

But what about foreign stock market downturns? Have they put local investors off the UAE stock market?

'Well that does seem to be the case,' says Mr Kumar. 'But in the past if other markets have not been doing well, then the local market has been seen as a refuge, and money has been repatriated from overseas.

Could the success of the Emirates Airline $408m corporate bond issue be the spark to set the market into motion?

'I don't think so,' says Mr Kumar. 'Bond and equity markets are different animals. But we are hoping that the EK2006 bond issue will trigger a few more, although it may require an incentive from the Central Bank to make this happen. In the current market banks are falling over themselves to lend money to local corporates, and that does not encourage the growth of a bond market where borrowing criteria are tougher.

'Having a bond market would certainly be a healthy thing for the UAE economy. It was one of the things that was missing in Asia and which contributed to the Asian financial crisis in 1998. Bond markets tend to be useful indicators if things are going wrong, and act as a warning signal to the rest of the market.

So will the UAE market climb the 'wall of worry' this autumn? Will the market follow Kuwait and Saudi Arabia into the stratosphere? Mr Kumar very much hopes so, and is keenly watching for signs that there are some climbers out there.