One reason for the fall was three rights issues sucking liquidity from the market. ' Qatar National Navigation & Transport Company, Qatar Islamic Bankand Commercial Bank of Qatarall increased capital through rights issues, forcing shareholders to mobilise funds to subscribe,' says Chandresh Bhatt, financial analyst at Kuwait-based Global Investment House. 'The market was also generally due a corrective phase and this has continued in July as investors indulge in profit-taking.'

The banking sector, which led the upward march in the early months of the year, turned tail and produced the steepest declines in May. The baton was then passed to the industrial sector, which fell the furthest in June. However, the banks are resuming normal service as the first-half results trickle out. Qatar National Bankled the way with a 40.8 per cent increase in six-month profits to QR 405.5 million ($111.4 million). Soaring oil and gas revenues and high liquidity filtering down to bank balance sheets make it likely that others in the sector will report similar success.

Activity around certain stocks has bucked the negative market trend. Shares in Qatar Telecom (Q-Tel)were the fastest climbers in June, up by 7.3 per cent, following the award to the operator, in partnership with Denmark's TDC Mobile International, of Oman's second mobile licence. Qatar Insurance Companyalso managed to end the month in positive territory, after announcing plans to expand into the sultanate. Likewise, Qatar Real Estate Investment Companycontinues to float on the buoyant real estate sector. However, the general trend was downwards, with only four advancers compared with 25 decliners. And trading volumes slowed considerably.

Looking forward, the rise in the share prices of Qatar Navigation and Qatar Shipping Companyappears set to continue ahead of the proposed initial public offering (IPO) in Q-Gas, a new liquefied natural gas (LNG) shipping company in which each holds a 20 per cent stake. The IPO is due to come to market in early 2005, promising a welcome deepening of the stock market. Q-Gas will be capitalised at QR 4,600 million ($1,300 million).

Analysts have been predicting for months that a corrective phase in market valuation might prompt passage of the long-awaited mutual funds law, offering a route into local stocks for international investors, who would no doubt be tempted by the DSM's regional and global out-performance. However, Doha has yet to signal its intention to issue the new legislation and it may take a more sustained downturn to persuade the government to share the bourse's riches.

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