It was almost seven years ago that AME Info first sat down with Kumar to discuss the local market outlook. And yet in some ways so little has changed: then we worried about the impact of a falling US dollar and an ongoing downturn in US equities.
At that time Kumar pointed to a lack of correlation between the US and UAE stock markets, and pointed out that the devaluation of the US dollar and lower interest rates (due to the peg to the dirham) was positive for the local economy. Is it still the same story?
'Well, yes, I think it largely is the same,' he said, sitting in the same office on Sheikh Zayed Road as seven years earlier. 'Of course, the UAE economy has moved on a great deal since then and today we have capacity constraints that are producing inflation which we did not have then.
'This is a cost pressure that will limit profit growth. But the authorities are addressing inflation and the supply of property should soon begin to ease rental inflation. On the whole, I am very positive about the outlook.'
Nevertheless, Kumar agrees that inflation could put a cap on the current UAE stock market rally. His real enthusiasm is reserved for the DP World initial public offering and what that might mean for the wider development of local capital markets.
'The launch of international stock market issues like the DP World IPO means that Dubai is starting to play in a different league altogether.'
The prize for Dubai is a big one, as a successful DP World IPO will likely be followed by a series of privatisations – including Emirates Airline – and will recapitalise local stock issues at international valuation levels, much in the same way that allowing foreigners to buy real estate in Dubai transformed this sector.
'The whole cake will be much bigger for all financial services companies in the UAE and the larger local participants will do very well,' says Kumar whose parent group Emirates Bank recently merged with the National Bank of Dubai to become the largest Middle East bank by market capitalisation.
For individuals buying the IPO, Kumar thinks that the authorities will want to leave some profit for them to build momentum for future privatisations. But he notes that the old-style of IPO oversubscriptions is 'most unlikely as the banks are undertaking an extensive book-building process' and that therefore big Day One profits are unlikely.
The DP World IPO could encourage shareholders in the local markets to sell their holdings to fund their IPO applications, and this might also dampen the present rally.
All the same, Kumar was a cautious advocate of buying UAE stocks in 2001, well in advance of the boom that came in 2004-5 and being ahead of the crowd always has its advantages.
See also:Better times ahead for Middle East markets?DP World IPO will be the making of the DIFX