The highest volumes for three weeks pushed the Dubai bourse to its largest one day gain since mid-January following a sudden leap by bellwether Emaar.

The Dubai Financial Market surged 3.02 per cent – or 160 points – to 5,457 points, its best close since July 3.

"The market was firm from the outset, with local investors the drivers of yesterday's momentum," said Julian Bruce, EFG-Hermes director of institutional equity sales.

"There was increased activity from foreign funds, but the market was all about local players who had been absent for some time. There was really aggressive buying in Dubai's blue chips."

Turnover increased to Dh2.1 billion, a 154 per cent hike on Tuesday's total. Crucially, much of this trading was claimed by the market heavyweights. Yesterday's volume of 537 million shares was the highest since June 1.

"There was no particular catalyst for yesterday's surge. We have been anticipating a rally following very strong earnings from the GCC and the UAE in particular," said Ahmad Shahin, Shuua Capital equities strategist.

"I would expect regional markets to swiftly recover whatever points they have lost over the past month or so," said Shahin.

On Sunday, Emirates Business warned the DFM's fate was in Emaar's hands and after three subdued sessions, the developer roared back to life, seeing Dh443 million of shares change hands to propel it up 5.5 per cent to Dh10.60. This is Emaar's best single-session move since February 20.

"Emaar's 43 million shares were significantly higher than its recent average, but really the rally was across the board," said Bruce. "When any stock goes up 5.5 per cent, one should be cautious because it's ripe for profit taking, especially with local investors continuing to believe in taking profits where and when they can."

Ajman Bank also enjoyed a mega turnover of Dh357m, but this would not have moved the market. Third-placed DFM Company did, however, with Dh217m of shares traded to push it up 6.4 per cent to Dh4.82.

Dubai Islamic Bank and du added 2.35 and 2.88 per cent respectively, while the influential Dubai Investments also prospered, surging 6.2 per cent.

Emirates NBD declined, with the UAE's largest lender falling 0.8 per cent after revealing it was facing further write-downs as a result of the US subprime crisis.

Gainers dwarfed losers 26:2, while Air Arabia, up 5.7 per cent, and Deyaar, up 4.4 per cent, together with Ajman Bank were the three most active stocks. Gulf Navigation appears back in vogue with investors and it added 3.6 per cent to Dh1.72.

"Buyers returned to the stocks that have been beaten up recently, but have strong numbers behind them," said Bruce.

"There is less panic over oil prices and global markets have returned to positive trading – the negative news flow has abated for the time being."

Arabtec posted yet another all time high of Dh19.45, although it retreated from an intraday peak of Dh19.90.

The index movement

Analysts have long warned any rally would require vastly higher volumes and a concentration on the leading stocks. Both these conditions were met yesterday, so the question is whether they will be sustained today or is it merely a brief aberration in an otherwise range-bound market?

"The positive outlook means the index should continue to move upwards, although I doubt it can increase another three per cent in one day," said Julian Bruce, EFG-Hermes director of institutional equity sales.

With many uncompleted buy orders over from yesterday, the DFM is expected to make gains today, though there will be inevitable selling pressure as some investors turn a quick profit.

Bruce said: "The key level for Dubai is 5,850 points and there's not a lot of resistance until then. In the past three months, the index has made two failed attempts to overcome this hurdle."

Providing the global picture remains positive, Dubai should move towards this level, said Bruce believes.

"But if oil prices continue to fall, 5,850 will be the target over the next two months," said Bruce.

"This is dependent on news flow and if conflict over Iran suddenly erupts, then risk adverse investors could push the index back down to 5,200 points."

Meanwhile, Ahmad Shahin, Shuua Capital equities strategist, does not believe the Dubai index will be noticeably restrained by the summer slowdown as both stock brokers and traders go on holiday to escape the scorching heat.

"We might see volumes drop a little, but they should remain significantly higher than the average over the past two weeks," he said.