The week ahead marks the peak of the second-quarter earnings season, with more than one third of the companies listed on Qatar's QE Index reporting. But the performance of stocks is likely to be shaped by the international backdrop, Abu Dhabi's Invest AD said yesterday.
Prominent companies reporting this week include Qatar International Islamic Bank and Qatar General Insurance and Reinsurance, in addition to Qatar Navigations due today. Qatar Gas Transport should report on Tuesday, Commercial Bank of Qatar and Dlala Holding on Wednesday and Qatar National Bank on Thursday. In the UAE, Emirates NBD and Shuaa Capital should release their second-quarter results tomorrow.
Even with this heavy flow of news on tap, a more critical measure of market sentiment may be developments outside the region, said Sachin Mohindra, the lead manager at Invest AD's GCC Focus Fund.
"All of the major stocks in the region have reported second-quarter profits either in line with consensus or beating estimates," Mr Mohindra said.
"The results have been pleasing, but unfortunately liquidity, which is triggered by sentiment, is negative and being influenced by global events. Regional and local investors are not looking at the fundamentals of a company but what is happening in the euro zone and talks on the US debt ceiling."
Last week, regional markets were stifled by lacklustre trading and low volumes.
Dubai's benchmark, the Dubai Financial Market General Index, was down 1 per cent to 1,523.42 for the week. The Abu Dhabi Securities Exchange General Index lost 1.3 per cent to 2,693.27.
National Bank of Abu Dhabi reported a 2.5 per cent increase in profits for the second quarter to Dh1.03 billion, but managed to trade only 10,000 shares following the announcement.
Qatar's index was down 0.8 per cent to 8,393.25. Oman's index was down 0.9 per cent to 5,942.81 and Bahrain's index lost 1.1 per cent to 1,303.27. The Tadawul All-Share Index closed 0.5 per cent higher at 6,522.52 yesterday.
Any focus on the euro zone would assess the potential damage to banks from any default of Greek sovereign debt and contagion to other peripheral countries, particularly Italy.
Trading in the early part of this week is likely to be dominated by reaction to European banking stress tests.
In the US, President Barack Obama and Republican legislators are grappling with the country's debt ceiling, which must be raised by August 2 to avoid default.
Ratings agencies have said they want to see a serious plan for deficit reduction or the country's "triple-A" credit rating will be in jeopardy.
"We need a liquidity trigger and some clarity on the global situation," Mr Mohindra said. "Regional and local investors who are mostly high-net worth are so prone to what's happening internationally. If they feel more comfortable I am sure they would be able to take more risk."
Kuwait's measure lost 0.6 per cent to 6,077.90 points last week after the country's stock market watchdog said it would extend a deadline on a by-law.
The regulations introduced by the Capital Markets Authority in March stipulate that investment funds cannot own more than 10 per cent of a single security, while investment firms must obtain a separate licence for lending and investment business.
The deadline to sort out their ownership in financial securities will be next March, Kuwait's state news agency Kuna said last week, which helped the index recover slightly from a seven-year low on Wednesday.
"There's still a lot of uncertainty in Kuwait with regards to the proposed new law," Mr Mohindra said. "Because of the large number of investment companies and cross-holding, people feel the move will lead to a broad sell-off on the stock market in the medium term to comply with the proposed law.
"Investors have not seen the full details of the law."