The Doha Securities Market (DSM) is in corrective mode at present, letting some air out of the growing bubble that had built up since March. Rampant valuations have been tamed to a more realistic level and declining stocks far outweighed those on the rise in September.Nevertheless, with a 38 per cent gain in the benchmark DSM index since the start of the year, the recent performance needs to be put in perspective. And as positive third-quarter results trickle out, the macroeconomic boom continues, and traders await the most eagerly anticipated share offering since Industries Qatar (IQ), so the outlook is far from gloomy. ‘The market remains in a consolidation phase,’ says Haissam Arabi of Dubai-based Shuaa Capital. ‘Forward price/earnings (PE) ratios, which earlier in the year had gone north of 25 and even topped 30, have declined to more sensible levels around the 20 mark. The DSM is quite immature and a bubble was being inflated by hype and excess liquidity.’ The DSM peaked at 6,089 on 27 April; by 18 October it had fallen back by 9 per cent to 5,540. Trading activity also waned in September, down by 36.2 per cent in value and by 32.3 per cent in volume. Among the few shares to add value during the month were those of Qatar International Islamic Bank (QIIB), which is the main shareholder in the recently-launched Islamic Bank of Britainand is rumoured to be planning a venture in Syria. Qatar National Bank (QNB) was another gainer. The bank is also venturing abroad, having signed a share purchase agreement in early July to acquire London-based Ansbacher Holding, a subsidiary of South Africa’s FirstRand. QNB is also looking at Syria in joint venture with Bank of Beirutand Emirates Bank International. Banking stocks are likely to continue to rise as the full picture of third-quarter earnings emerges – with the trend of healthy profitability growth expected to continue. ‘Already the nine-month results across the sectors are looking even more positive than anticipated, driving the market back up,’ says Arabi. Looking forward, Qatar Telecom (Q-Tel)is a stock to watch. The share price has risen since the operator was awarded the second mobile licence in Oman, but remains relatively cheap. ‘Q-Tel stock has done well recently but is still trading at a discount to its fair value,’ says Arabi. ‘The PE ratio is down at about 14.’ IQ is also a good bet as gas-based industries in the country gather momentum. Another major initial public offering (IPO) is on the way, this time in Qatar Gas Transport Company, created by the government in June to lease out a fleet of liquefied natural gas (LNG) tankers. Capitalised at $4,200 million, half of the shares will be offered to the public, most likely in the first quarter of 2005. Also due early in the new year is the debut for foreign traders investing directly in the local bourse, according to an announcement in August by the Commerce & Industry Ministry. The way the DSM has been moving over the last two years, there will be no shortage of individuals and institutions looking for exposure.