Khalid Fouad (page 1 of 2)

A: Let me start by saying that the stock market is the place to be invested for the long run. Over long periods of time the stock market has had far greater returns than any other investment class. The UAE market has a lot to offer for the buy-and-hold investor with an investment horizon of five to 10 years.

It is believed that prior to the actual opening of the Qatari market to foreign investors local Qatari investors built high expectations on the back of this decision that in my opinion affected the stock prices. This sharp upward movement in prices discouraged a lot of foreign investors from entering the market which left the local investors with large positions thus started liquidating which triggered a selling frenzy which in turn affected the market as a whole.

Nevertheless, the Qatari market still has solid potential, especially once the local economy starts to reap the benefits of high oil & gas prices and high government spending on infrastructure projects.

2. The rush to issue IPOs in the UAE and GCC is superficially at least like the dotcom IPO bubble of 1998 to early 2000, i.e. a lot of highly valued start-up companies in an atmosphere of very high optimism about the future. Do you think this is a fair comparison, and if not why not?

A: Comparing the current wave of IPOs in the GCC to the dot-com IPO bubble of 1998 is not a fair comparison for several reasons:

a. During the Dot-com bubble PE ratios of the NASDAQ-100 index reached as high as 500 times and currently (even after the March 2000 crash) it is trading near the 50 mark. The average GCC markets PE are in the 25 - 35 range and this has not entered, in my opinion, the red zone.

b. There is a fundamental difference between investing in a company that promises to derive its revenues from counting eyeballs and clicks and a company that promises to derive its revenues from investing in major projects developing the country's infrastructure, such companies as Al-Dar, Aabar and Surouh.

c. Investors in UAE listed companies hold by virtue of their stock ownership bits and pieces of real assets, such as real estate, oil & gas plants, manufacturing facilities. I find it hard to compare this to investing in information goods that couldn't create competitive advantage or provide significant barriers to entry.

3. TNI has taken a lead role in many IPOs. Do you think that the quality of the candidates for IPO is deteriorating? A lot of the companies are start-ups with nothing more than a business plan, how can you be confident these companies will delivery long-term value to investors? Surely not all the companies will succeed.

A: Looking back at the recent IPOs managed by TNI, namely Finance House, Al-Dar, AIL, Aabar and Surouh, you will recognize that each had its own distinct characteristics and fulfilled a specific market demand.

We have a simple straight forward approach to bringing companies to the market. We work closely with our clients in analyzing underdeveloped or fragmented sectors to look for opportunities to develop a market leader with a clear competitive advantage that could be in a position to consolidate an industry or a sector.