The Saudi Arabian stock exchange mirrored the region-wide trend. 'Markets are not freefalling,' says the analyst. 'But people are withdrawing and values are up and down across the region. It's a strange pattern.' The Tadawul All-Share Index (TASI) fluctuated over the course of the week ending 26 July, closing at 10,393 points. Trading was volatile. On 22 July, 138 million shares changed hands, jumping to 318 million the next day, before falling to 184 million by week-end.

But investor appetite for initial public offerings (IPOs) of shares remains strong in the kingdom, as seen in the high demand for shares in Emaar The Economic City. Subscription to the IPO of 30 per cent of the company's shares opened on 22 July for 10 days and was oversubscribed by the end of the third day. However, the offering, which will raise SR 2,600 million ($693 million), took its toll on the Dubai bourse, draining the market of Saudi Arabian liquidity.

Despite a run of sound corporate reporting, the Dubai Financial Market (DFM) closed at a 19-month low on 26 July with the index at 405 points, down almost 60 per cent year-to-date. As the index edged toward the psychologically important 400-point barrier, volumes fluctuated, with turnover rising from AED 75 million ($20 million) on 23 July to AED 243 million ($66 million) the next day. 'People are going in and out of the market,' says the analyst. 'There has been some profit-taking as stocks hit their lowest prices.'

Investor interest in the IPO of shares in Gulf Navigation Group, which opened on 24 July appeared to be muted. Put off by the high cost of financing and diminishing profit margins, UAE investors are wary of investing cash in IPOs only to receive a small allocation of shares. 'Everybody is hopeful, but on a first reading there's not a big appetite [for Gulf Navigation shares],' says Mohammed Ali Yasin, managing director of Emirates Securities. 'In general, small investors are becoming more choosy. There's less cash available and less profit to be made. Original shareholders and big companies are filling in the gap.'