In the week ending 27 June, the DFM dropped by 4 per cent, pushing the index down 57 per cent year to date. Average daily trading value for the week stood at only $108 million, despite robust turnover of $262 million on 27 June due to fund activity. The trading contrasted starkly with the average daily turnover of $363 million for the last 12 months.

Investors have switched liquidity from the DFM to the Abu Dhabi Securities Market (ADSM) over the past month even though investor motivations remain unclear. 'There's no obvious reason for it,' says a Dubai-based analyst. The shift was highlighted on 10 June, when $391 million worth of shares changed hands on the ADSM, a near six-fold jump on average turnover of $71 million for the past 12 months. In the week ending 27 June, turnover on the ADSM returned to a more sedate $69 million a day.

Emaar Properties is continuing to cast a shadow over the DFM. Its share price was down 4.6 per cent on 27 June, after dropping 9 per cent the previous day with shares trading at a discount of AED 11.2 ($3.04). Emaar's price/earnings ratio (PE) of 11 is now well below the market average of 14, making it appear an attractive buy.

Most stocks fell over the course of the week, including Amlak Finance and Dubai Islamic Bank. National Bank of Dubai's stock split on 24 June failed to buoy the share price for more than a day. The stock closed at AED 12.5 ($3.40) on 27 June.

Emaar's share price has been under pressure ever since the company announced its 2005 earnings in January. As with other blue chips, its second-quarter results, expected in July will be closely watched. 'People are anticipating poor results [among listed companies],' says Agarwal. 'Only a few companies have not invested in the secondary market. People will have to do some research and focus on fundamentals. Until now, they've relied on tips.'

The DFM is pinning its hopes on the launch of two new Dow Jones indexes at the end of the year to help attract institutional investors. But changing investor behaviour and boosting confidence will take some time. A common theme repeated by market watchers is that it will take until the end of the year for speculators to exit the market and for it to start to recover.