‘Investors have adopted a wait-and-watch strategy,’ says Faisal Hassan, analyst at Global Investment House. ‘They are seeing how the political situation develops, but more importantly they are waiting for second-half results.’ A number of regional banks and blue chip companies have reported first-half earnings. Healthy bank profits have allayed investor concerns that exposure to correcting markets and a decline in fee income from exiting investors would reduce profits. But trading volumes remain light as investors weigh up buying opportunities in other listed companies on a case-by-case basis.

The earnings announcements of market pillars Saudi Basic Industries Corporation (Sabic) and Emaar Properties failed to stir significant investor interest. Saudi Arabia’s Tadawul All-Share Index (TASI) continued its volatile run in mid-July, dropping 16 per cent over the course of the week to close at 10,172 points on 16 July. The bourse rallied on 17 July with the index closing up 8 per cent, with investors seemingly unconcerned by the announcement of a year-on-year drop in Sabic’s first-half profits to SR 8,800 million ($2,346 million). ‘We’re just seeing the continuation of the correction,’ says Ahmed Shahin, an analyst at Dubai-based Shuaa Capital. ‘Government intervention did help, but now the market has fallen back.’

Having become accustomed to high earnings reporting, investors in the UAE were unimpressed by Emaar’s announcement of a 21 per cent increase in profits to AED 3,053 million ($831 million) for the first half of the year. The Dubai Financial Market remained flat. Average trading volumes on the bourse in mid-July of $153 million a day were half the average for the quarter.

In the rest of the Gulf, the holiday season has set in. ‘The markets slow down in summer but volumes are much lower due to the overall decline,’ says Shahin. In Kuwait, investors followed the trend, waiting for the market to turn. Shuaa’s Qatar index was down 5 per cent on the week ending 16 July. On the illiquid Bahrain Stock Exchange, average daily trading in mid-July was $839,000. The Muscat Securities Market 30 Index remained largely unchanged, sticking around 4,850 points for the week.

A reordering of investment portfolios that traditionally coincides with the reporting season is expected to breathe some life back into the regional bourses. ‘We might see a rise in trading activity when investors have a more complete picture,’ says Hassan.