'The exchanges over the past month have been flat overall but volatile,' says Joe Kawkabani, fund manager at Dubai-based Shuaa Capital. 'The market wasn't doing so well coming close to the end of the year, as investors got edgy and started booking profits. In addition, there might have been some portfolio reshuffling by certain institutions ahead of the end-of-year audit. But once prices had fallen severely, local and regional funds intervened, driving prices back up.' Valuations remain high, given that few analysts expect the blue chips to maintain 2005 profit growth rates in 2006. The average price/earnings (PE) ratio stands at about 24.

Trading has generally been thin recently, with a brief period of gathering momentum curtailed by the death of Sheikh Maktoum bin Rashid al-Maktoum and the Eid holiday in mid-January. However, activity is set to pick up soon, as companies begin publishing full-year results. 'Share prices usually head higher during this time of year,' says Kawkabani. 'The blue chips are generally the most popular, as they are set to report further increases in profitability and begin distributing dividends. Plus during periods of volatility, investors like the big stocks. Both the banking and real estate sectors continue to look good bets.'

Greenfield initial public offerings (IPOs) remain on hold pending the issue of new legislation governing them. The reforms expected are changes to the rules on valuation, the percentage of the company that must be sold and the absence of any requirement for a track record. 'We are hoping for but not expecting them soon,' says an investment banker. 'Hopefully the cabinet reshuffle [following the death of Sheikh Maktoum] will give things a jolt.'

Several IPOs of existing companies are in the pipeline. Due to come to market during the first quarter is the sale of shares in Emirates Ship Investment Company (Eships), owned by Mubadala Development Company, Abu Dhabi Investment Companyand Oman & Emirates Investment Holding Company. HSBC is the financial adviser. Also scheduled to come to market during the first half is an IPO of 55 per cent of shares in RAK Petroleum Company, the local shareholder in a petrochemicals complex planned in Ras al-Khaimah. Advisers are close to being appointed. And the IPO of shares in Bina, the building materials arm of Abu Dhabi's General Holding Company, is also likely to take place during the first three months of the year, pending final regulatory approvals. HSBC is again advising. However, a swifter flow of deals will be necessary if the overheating bourses are to be calmed.