'The freefall that began in April coincided with the opening of the market to foreigners,' says Joe Kawkabani of Dubai-based Shuaa Capital. 'Foreigners were not interested in the stocks at the prevailing prices and there were lots of sellers in the market, so a severe correction occurred. But with the release of second-quarter earnings, the market rebounded.'

Investor reaction was understandable, given the impressive corporate results. Qatar National Bank'sprofits rose by 71 per cent to $189 million while Commercial Bank of Qatar registered an 81 per cent increase. And the market sentiment was relatively positive towards the acquisition by CBQ of a controlling stake in National Bank of Oman. 'Usually investors would be very cautious in the wake of such an acquisition, as they mull over whether the move is a wise one. But in this case the share price did not drop,' says Kawkabani.

The main market event over the past month has been the proposed merger of three insurance firms, Al-Khaleej Insurance Company, Doha Insurance Company and - the state's largest - Qatar Insurance Company, which would create an entity with assets worth in the range of $1,600 million. The tie-up is designed to protect the smaller two companies from increasing foreign competition in the market, while Al-Khaleej would contribute an Islamic insurance dimension.

In contrast to the positive reaction of the market to most six-month results reports, the stock of Industries Qatar (IQ)has suffered recently due to lower-than-expected profits. 'The shares of IQ [which owns stakes in Qatar Petrochemical Company, Qatar Fertiliser Company, Qatar Fuel Additives Companyand Qatar Steel Company] have suffered from a global downturn in petrochemicals prices, but the outlook is positive because of the company's expansion plans,' says Kawkabani. IQ's share price climbed to QR 204 ($523) on 22 August.

The share price of Qatar Gas Transport Company (Nakilat) has been rising recently, and foreigners have clearly taken an interest in the recently formed company: non-Qataris were barred from purchasing further shares in mid-August, after the 25 per cent quota on foreign ownership was reached. The company recently signed agreements to take stakes in 12 liquefied natural gas (LNG) tankers, out of more than 50 that it will eventually partly own.

The soaring but still immature market is set to deepen in early September, with the listing of shares in the recently established brokerage and investment company Dilala, which staged an initial public offering (IPO) in May. While local companies are likely to continue posting very healthy results on the back of the expanding economy, the main threat for the DSM is in excessive valuations. 'The average forward PE [price/earnings] ratio, at about 31, is pretty scary,' says one analyst.

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