Investors are bracing themselves for a bumpy start to the week as weaker earnings from the country's blue-chip stocks are likely to take their toll on trading, fund managers say.
Emaar Properties and Etisalat both posted lower-than-expected earnings after the closing bell on Thursday, meaning today will be the first chance for investors to react.
Emaar Properties posted a profit of Dh7.63 billion for last year, a decrease of more than 13.6 per cent compared with 2009. .
Emaar, the largest developer in the region, reported fourth-quarter profits fell by 62 per cent to Dh274 million compared with the same period in 2009 after two companies it part-owns, Amlak Finance and Dubai Bank, wrote down the value of their assets. Shares of Emaar declined 1.8 per cent to Dh3.25 last week.
"The misses in numbers were definitely not expected and we will see some selling pressures," said Haissam Arabi, the chief executive of Gulfmena Alternative Investments in Dubai.
"This could affect all the other sector-related companies, in particular those that haven't reported yet."
Dubai's largest contractor, Arabtec Holding, is yet to release its earnings. Union Properties and Deyaar Development, two property firms listed on the Dubai bourse, have also not released earnings yet.
Last week, Aldar Properties, Abu Dhabi's biggest developer, posted a loss of Dh12.65bn compared with a profit of Dh827.4m a year earlier.
The Abu Dhabi Securities Exchange General Index added 1.3 per cent to 2,710.61 last week, while the Dubai Financial Market General Index declined 0.4 per cent to 1,598.40.
Brokers say investors are holding stocks for shorter periods because of the increased volatility in recent weeks, fuelled by events in Egypt and thin volumes on the local bourses.
"The nature of the beast that is the market is giving us a short time horizon. There are so many variables and so many shocks that we're facing," Mr Arabi said. "If you see the stock up 5 per cent, you take your profits and not take the risk, and buy when it becomes cheaper."
The ADIB Islamic Banking Index last week declined 2.7 per cent to 948.80.
Qatar's bourse is expected to see a boost in trading this week as the correction from the banking sector may have run its course. Last week, the Qatar central bank issued a circular to conventional banks in the country asking them to end their Islamic banking operations by December. This decision came as a surprise to Qatari bank officials, especially given that the central bank issued a circular in August introducing a number of regulatory restrictions on Islamic banking franchises.
According to bank officials, discussions with the central bank are taking place to clarify the rationale of the decision, and the process of closing down operations if necessary.
"We expect the Qatar central bank will communicate further today," said Tarik el Mejjad, a banking analyst at Nomura investment bank in London.
Qatar's banking sector declined last week after the circular was released. "Prices are at a floor, which is creating interest," Mr Arabi said. The country's measure, the QE Index, gained 0.1 per cent to 8,949.76.
Elsewhere in the region, Oman's bourse added 0.4 per cent to 6,914.97 and Kuwait's was flat at 6,738.90. The Saudi Tadawul All-Share Index moved yesterday.