The correction has been driven by several factors, notably overvaluations in the real estate sector, a lack of liquidity in the local market and panic selling by smaller investors. 'Sectors such as financial services and real estate have been overvalued,' says a senior analyst at Atlas Investment Group, the investment banking arm of Arab Bank. '[And] as the correction continues, it may be difficult for the real estate sector because estimations are so high at the moment.'

A shortage of liquidity resulting from capital increases has added to the downward trend, with investors selling stocks in an attempt to raise funds to buy into the offerings. 'If you take the capital increase at Arab Bank, you saw investors selling half their stock just to participate in Arab Bank's rights offering,' says the analyst. A lack of experience on the part of smaller investors has also been a contributory factor to the market's recent decline. 'Only a year ago the market was rumour-driven and people would see a stock going up and jump along for the ride,' the analyst says.

Despite the recent corrections, the real estate sector continues to attract undaunted investors. The local Tameer on 13 March successfully closed a JD 53 million ($75 million) public placement, while a new real estate company, Al-Mazaya Holding Jordan, was established in early March with capital of JD 40 million ($56.7 million).

The upcoming sale of government stakes in local companies is expected to boost market activity. Amman is moving ahead with plans to sell an additional 11 per cent out of its 41.5 per cent stake in Jordan Telecom (JT) to France Telecom, making the French operator the majority shareholder in JT. Of the remaining government stake, 3 per cent will be sold to the armed forces at a discount and the rest will be offered to the public. Goldman Sachs is advising the government on the offering, expected to be concluded by the end of April.

Further sales are planned. In the industrial sector, the government approved on 4 March a recommendation from the Executive Privatisation Commission to sell its remaining 37 per cent stake in Jordan Phosphate Mines Company to the Brunei Investment Agency. The transaction will involve the sale of 27.75 million shares, 37 per cent of the company's 75 million total, at a price of $4 each. A block trade of the $111 million transaction on the ASE is expected by the end of March.

Looking forward, the outlook remains mixed. 'Over the next couple of months, I would expect the index to go down a bit more,' says the analyst.