Bogus share trading is nothing new in the UAE, but the DIB incident was startling for its audacity. A pair of Saudi investors exploited unconfirmed rumours of a capital increase at DIB to push up the bank's share price by extensive trading between each other, causing the bank to account for more than 80 per cent of exchanges on the Dubai Financial Market. 'The choice of stock makes sense because if you're going to pull this sort of stunt, you would pick a company that has such rumours surrounding it - the whole point is to attract attention to the stock so that you can sell what you bought at a profit,' says Joe Kawkabani, fund manager at Dubai-based Shuaa Capital.

However, the regulator won widespread plaudits for its swift action. All that day's trades in DIB shares were cancelled and the regulator, the Securities & Commodities Authority, vowed to investigate and punish those involved - including a brokerage house. 'The authorities sent a good message that they will crack down on market abuses and protect investors,' says Kawkabani. 'In terms of share prices, the market as a whole has not really been affected, although DIB's shares suffered slightly as investors realised that the capital increase might be less certain than they had been led to believe.'

A slight correction was felt in late August, but was due after a surge during the first three weeks of the month. The Shuaa UAE index remains up by more than 90 per cent since the start of the year. 'Looking forward, cement stocks are looking undervalued across the federation because they are less liquid than others, but they might pick up towards the end of the year,' says Kawkabani. 'The insurance sector is also cheap, but less attractive, and real estate is a good bet as property developments gradually open up to foreigners.'

The flood of initial public offerings (IPOs) in the first half of the year has slowed to a trickle, the most recent being of shares in Abu Dhabi National Energy Company (Taqa), which closed oversubscribed in early August. For the time being, the days of greenfield companies launching IPOs which end up tens of times oversubscribed are over. The Economy & Planning Ministry has suspended share offerings in all new companies until the end of the year while new IPO regulations are drawn up. The reforms are likely to centre on changing rules that bar the listing of private joint stock companies, require shares to be sold at par and insist that at least 55 per cent of capital should be sold.

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