The Shuaa Capital index for the UAE was 28 per cent up on the year on 17 November. The NBAD and EMNEX indexes have risen by a similar amount. Turnover on the two official markets combined in the first 10 months of the year was one third higher than in the whole of 2002.

And yet, investors have reasons to feel short-changed. Despite the price and turnover boom, the stock markets of the UAE are the second worst performers in the GCC so far this year. Only the Bahrain Stock Exchange has risen by less. In contrast, the Kuwait Stock Exchange was 90 per cent up on the year by the middle of November.

'This year, we have seen record volumes and the highest activity for the market as a whole,' says Walid Shihabi of Shuaa Capital. 'But the market is not fulfilling its full potential.'

Several factors are holding back the market. The first is structure. There are three places to buy and sell UAE shares: the Abu Dhabi Securities Market, supported by the government of Abu Dhabi; the Dubai Financial Market; which is sponsored by the government of Dubai, and the over-the-counter market.

Analysts also complain about the absence of an equity culture. There are few intermediaries serious about research and investment and investors tend to be speculative. There have been no recent initial public offerings to stimulate interest. Finally, there are a number of alternative investment opportunities in the UAE, notably in real estate.

However, for those with a long-term perspective these deficiencies represent opportunity. Equities are comparatively cheap by regional standards. The UAE's economic prospects are excellent. Abu Dhabi has the world's third largest reservoir of crude oil and substantial reserves. Dubai has embarked on an urban development and tourism programme designed to double its population in short order.

The missing link is a decisively fresh approach to the structure of the market to create a single exchange with sufficient volume to attract serious regional and international investors. The UAE's equity market moment will come, but not just yet.

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