Regional investors will be looking towards Egypt this week as voters prepare to cast ballots for a president, for the first time since Hosni Mubarak's departure, and effect the country's transition to democracy.
Egypt's stock market rallied 40 per cent this year after the country completed the first phase of its electoral process but has lost steam in recent weeks. The coming presidential vote may see another wave of buying.
"We are about to witness history in the making, a free election for the first time," said Wafik Dawood, the head of institutional sales at Mega Investments Securities in Cairo. "I suspect the markets will have another wave of euphoria in the same way it did after the parliamentary elections."
Last week, Egypt's electoral committee approved a list of 13 candidates. Egyptians will vote on May 23 and 24. If required, a run-off will be held on June 16 and 17, with the final result announced on June 21.
From an economic perspective, a US$3.2 billion loan from the IMF should be finalised by May 15, before the new president is sworn in at the end of June. The government needs $11bn of financing in two years, Momtaz El Saieed, the finance minister, has said.
Moody's Investors Service last week extended the time frame of its review of the country's ratings to consider "the credit implications of the country's upcoming presidential elections and its ongoing negotiations with the IMF".
"[The] Moody's decision to postpone its rating reviews really highlights the significance of both of these events on the country's economy," Mr Dawood said.
The EGX 30 Index added 2.2 per cent to close at 4,934.92 last week. The average trading value dropped to $60 million per day last week, down from $70m in February and $80m in early March.
Egypt's market is trading with cheap valuations, Mr Dawood said, with most stocks below 10 times earnings. That compares with 11 to 12 times earnings on UAE markets, and above 12 times earnings for Saudi Arabia and Qatar.
In the UAE, strong earnings from the financial services sector, which has recorded strong profit growth amid slack lending, could also spur market confidence.
"Good numbers are coming out of the banking sector - there's good enough earnings coming out to justify the rally we've had," Haissam Arabi, the chief executive officer of Gulfmena Alternative Investments, said. "This might perform as a catalyst for trading to continue well."
With the outlook for global markets seen as improving, Gulf traders are likely to breathe a sigh of relief and focus more on the strength of the local economy, Mr Arabi said.
"We still have the global macro-environment issue, but as things are calming down in Europe, this will give a chance for markets to start looking to market fundamentals and, hopefully, move on the positive numbers," he said.
UAE markets finished a little higher last week. The Dubai Financial Market General Index rose 0.1 per cent to 1,651.90 over the course of the week, while the Abu Dhabi Securities Exchange General Index added 0.4 per cent in the period to finish the week at 2,507.90.
Kuwait's measure rose 0.5 per cent to 6,337, Bahrain's fell 0.9 per cent to 1,145.24, Oman's MSM 30 Index declined 2.1 per cent to 5,839.19, and Qatar's QE Index fell 0.4 per cent to 8,661.46.
The Saudi Tadawul All-Share Index moved up 0.88 per cent to 7,607.59 yesterday.
* with Bloomberg News and additional reporting by Gregor Stuart Hunter