As the earnings-reporting season enters its second week, investors are banking on stronger-than-expected third-quarter profits to trigger a rebound in regional markets after a disappointing year so far.
"We need surprises in profits rather than a sustained continuation from previous quarters," said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Abu Dhabi. "Markets are so jittery, and unless we see a rebound, we cannot expect any reversal to the continuous downward trend."
The Dubai Financial Market General Index sank to a fresh seven-month low last week, dropping 2.4 per cent to 1,395.43. The measure is down 15 per cent since the start of this year.
The Abu Dhabi Securities Exchange General Index declined 1.6 per cent over the week to close at 2,494.46.
Companies in the region began reporting third-quarter financial results last week, with most sectors demonstrating strong growth and profitability.
Qatar National Bank, the country's largest bank by assets, reported a 1.9 billion-rial third-quarter increase in profit over the same period last year, largely attributable to higher income on lending.
In Saudi Arabia, Jarir Marketing, the country's largest stationery and book seller by market value, said third-quarter profit rose 48 per cent to 152 million riyals on higher sales.
Mr Yasin hopes UAE company figures will be comparable to results in Qatar and Saudi Arabia.
The HSBC UAE purchasing managersindex, which measures the performance of the country's manufacturing and services sectors, rose to 52.11 points last month from a 15-month low of 50.95 in August, according to a survey of 400 private-sector firms published last week. The 50-point level separates growth from contraction.
But volumes were too low to trigger any kind of rally to show that the region has dodged the effects of the European debt crisis so far.
"Markets will continue to see volatility with no direction as European policymakers grapple with a worsening debt crisis," said Tariq Qaqish, a fund manager at Al Mal Capital in Dubai.
Analysts began to publish their third-quarter earnings forecasts for UAE companies last week.
National Bank of Abu Dhabi (NBAD) is expected to post an 8.3 per cent rise in third-quarter profit to Dh996.71m, according to a consensus of seven analysts at HSBC, Morgan Stanley, Deutsche Bank, Global Investment House, EFG-Hermes, SICO and Beltone Financial.
NBAD reported a profit of Dh919.75m in the third quarter last year.
"This sector should post the strongest results as it is in recovery mode," Mr Yasin said.
The UAE's overall bank deposits in August exceeded loans for an 11th month, according to Central Bank data. The value of loans rose 0.5 per cent in August from July to Dh1.05 trillion, while deposits dropped 3.2 per cent to Dh1.07tn.
The property market should still face headwinds from a decline in sales and asset values, Mr Yasin said.
Emaar Properties is expected to post a 36 per cent decline in profit in the quarter to Dh386.51m, according to analyst estimates at Global Investment House, EFG-Hermes, SICO and Beltone Financial.
Emaar posted a net profit of Dh612.28m in last year's third quarter.
Du, the country's second telecommunications operator, is expected to report a 31.2 per cent increase in net profit to Dh214.08m for the quarter as it continues to gainmarket share against its rival, Etisalat. Du reported a net profit of Dh163.1m in the third quarter of last year.
Elsewhere in the region, Kuwait's measure was down 0.2 per cent to 5,826.10, Bahrain's fell 0.9 per cent to 1,165.71, Oman's declined 1 per cent to 5,534.97 and Qatar's retreated 1.3 per cent to 8,424.45. The Saudi Tadawul All-Share Index rose 1.3 per cent yesterday to 6,084.55.