The UAE's stock markets are set to bounce by 15 per cent to 20 per cent during the next few sessions before turning to sideways trading for several weeks, says an analyst.
The expected rally on both the DFM and the ADX will depend on several factors including the entry of new liquidity to the markets, listed companies' levels of debt and oil prices, according to Homan Al Shamaa, an economic consultant at Al Fajr Securities.
"Even though there was no specific news in the two markets to encourage this rally, sentiment was very positive from the beginning of the session," he said.
"International and regional markets performed strongly during the first two sessions of the year and this had a strong positive impact on sentiment."
Other positive factors included the strong advance of oil prices, a critical factor in determining investor confidence.
"Investors are watching oil prices and any further rise will increase the positive sentiment because it will be expected to increase liquidity in the UAE and GCC markets.
"The recovery of the UAE markets will depend on the average oil price in 2009, which is expected to reach $65 per barrel.
"The UAE markets suffered major losses during the last three months of 2008 and the bounce was anticipated. The markets are expected to advance by between 15 and 20 per cent in the short term and we will then see sideways movement."
Al Shamaa said the release of financial results and news by listed companies would have a minor impact because the markets had already taken expected losses into account. Investors were no longer influenced by good news from the companies.