Regional stock markets are expected to continue consolidating and displaying some signs of weakness this week, according to a report by Al-Masah Capital, published on 26 May.

Sharp selloffs on regional stock markets last weekend were “much-needed” as Dubai, Kuwait and Abu Dhabi had become overbought in a short period of time, noted another report published by the DIFC-based asset management firm.

It called the pullback “hardly worrisome, as occasional corrections and consolidations reduces overbought conditions and flushes out the weak players.”

UAE stock markets continued to decline on 26 May, with the Dubai Financial Market General Index dropping 1.06 per cent to 2,281.27 points and the Abu Dhabi Securities Exchange General Index declining 0.96 per cent to 3,427.2 points. The Saudi Stock Exchange (Tadawul) was down 0.24 per cent at 3.30pm, shortly before market close, at 7,316.33 points.

Following a comment by Federal Reserve chairman Ben Bernanke on 22 May, investors globally sold off stocks amid fears that the US Fed will end its third round of quantitative easing (QE3), which has led the Fed to pump billions of dollars into US government debt.

On 23 May, Japan’s Nikkei plunged 7.8 per cent, while European stock exchanges registered a decline of more than two per cent. The panic spread to regional stock markets as well, with Egypt’s falling 1.4 per cent, Abu Dhabi’s dropping 1.2 per cent, Kuwait’s and Dubai’s both declining 0.8 per cent, and Qatar’s declining 0.4 per cent. The Saudi stock exchange, which was closed for trading on Thursday, followed the downward on 25 May after the five previous days were all positive for the index.

Fears eased slightly when bullish analysts, some working for the Obama administration, quietly advised institutional investors that QE3 was not coming to an end.

Despite the selloffs, regional stock markets are bullish over the month of May, with the UAE and Kuwait registering record highs and Saudi Arabia and Qatar slowly gaining pace.