The Dubai Financial Market was the top gainer among GCC markets yesterday as regional exchanges revealed signs of weakness after the rally earlier this week.

The DFM added 2.53 per cent and was followed by the Kuwait market, which advanced by 1.2 per cent. The Qatar and Saudi exchanges advanced while the Abu Dhabi Securities Exchange and the Muscat bourse retreated. The Bahrain market was closed for a public holiday.

The markets in general traded sideways due to the absence of strong movers or new catalysts that could affect the trend. However, analysts expect the regional markets to move in the downside in the medium term as investors started to focus on expectations for annual results and potential earnings as well as cash and share dividends.

"The regional markets are projected to face a period of weak trend during the coming six months," said Sami Saydam, CEO of Vip-Gold & SS-Forex. "The coming period will witness a general downtrend with new lows and lower highs. There could be temporary up-trends that benefit speculators but not long-term investors."

However, he stressed that the expected downturn on the GCC stock markets would not reflect the economic situation in regional countries. "GCC economies look strong with good liquidity and oil revenues. Infrastructure projects are proceeding according to plan and this is supporting growth and the economic situation in general.

"The expected downturn on the markets will be related to the banking sectors and the tightening of liquidity in the regional banking system due to its correlation with global financial institutions which are still suffering from a shortage of liquidity."

He said oil and gas revenues in the region would play a major role in supporting companies suffering from tight liquidity.

"The main cause of companies' problems is the shortage of liquidity. GCC countries could help by creating a large regional investment fund to provide liquidity for regional companies and businesses and this would protect the regional markets from further downsides due to the hardship faced by companies in member countries."

"Such a fund could offer huge support for the region. Dubai could benefit from this trend along with the whole region because Dubai would continue to be the region's gateway to the rest of the world." Saydam said regional countries should cooperate to solve liquidity problems of in the banking sector to ease the situation for companies and the regional markets.

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