Trading slowed slightly in September and October, although less than elsewhere in the Gulf, partly due to the initial public offering (IPO) of shares in Sharjah-based Dana Gassucking liquidity from the market. 'Volumes have still been comparatively good, but we are in a consolidation phase,' says Joe Kawkabani, fund manager at Dubai-based Shuaa Capital. Valuations remain steep. 'Nine-month earnings imply full-year growth of about 50 per cent, compared to a forward PE [price/earnings] ratio of 29.'

Rising year-on-year profits among the blue chips are no surprise in the local boom economy. 'Surprisingly, the market did not react much to nine-month profits increases and the DSM index has been flat for the past two or three weeks,' says Mohamad Moabi, executive manager for economics and planning at Qatar National Bank (QNB). The banks once again posted strong earnings growth, with QNB reporting a 74.4 per cent increase in profits to QR 1,172 million and Commercial Bank of Qatar- which is planning a rights issue to raise capital by 25 per cent to about QR 9,340 million - seeing earnings rise by 107.9 per cent to QR 556.8 million.

The major market event recently has been the listing of shares in newly formed brokerage and investment company Dilala, which staged an IPO of just over 25 per cent of its QR 200 million capital in May. The firm will be responsible for all brokerage activities in the country, previously conducted by the local banks, each of which has taken a 3 per cent stake in the greenfield venture. Investors who participated in the IPO made handsome profits: shares went on sale at more than eight times the QR 10 offering price. Further deepening of the bourse could be on the horizon. There is talk in the market of Qatar Petroleumoffering shares in its small and medium-sized industries and of public subscription to shares in a new bank to be launched by prominent local investors.

Going forward, Salam Grouphas performed well, although share trading has been temporarily suspended pending both shareholder and regulatory approval for the planned merger with Salam Internationaland a capital increase. 'The merged entity will have the advantage of exposure to two booming markets,' says Kawkabani. ' Qatar Insuranceis also a good pick - it is the biggest and best insurance company in the country, nine-month profits showed an 81 per cent increase and the stock is comparatively cheapat a PE of about 17.' In late October, the company announced plans to establish a subsidiary.

Valuations suggest that a corrective phase is overdue on the DSM. However, the pace of Qatar's economic growth means that the overall outlook is extremely positive.

Exchange rate: $1=QR 3.64