Gulf bourses were mixed on Sunday and for the month of June but bulls ran ahead in the second quarter, outperforming frontier peers and a poor performance on emerging markets, as attractive valuations and strong economic outlook spurred buying. Egypt's bourse however, rose to a near-three-week high on Sunday in very thin trading but posted its third consecutive quarterly loss as bears dominated amid escalating political tensions.
Markets in the United Arab Emirates were the strongest gainers for the quarter as a partial recovery in property prices triggered positive sentiment among investors. Government spending plans and a buoyant tourist industry have added their weight to the healthy economic outlook.
Speculative buying also propelled the market ahead of the mid-June announcement by index compiler MSCI that it would upgrade the UAE and Qatar to emerging market status.
Dubai's index, flat on Sunday, rose 21.5 percent in the second quarter and Abu Dhabi's benchmark added 0.3 percent to push its quarterly gain to 17.4 percent - its best performance since the third quarter of 2009.
"The markets have to correct during the summer and Ramadan (Muslim month of fasting) but expect a comeback if the global scene is benign," said Ali Adou, portfolio manager at The National Investor.
Strong tourism numbers in Dubai and a potential for the emirate to secure the right to host Expo 2020, along with heavy infrastructure investments in Abu Dhabi, underpin a bullish outlook for the UAE, he added.
Qatar's index slipped 0.3 percent on Sunday, trimming its quarterly rise to 8.1 percent - but still outperforming the last nine quarters. Investors bought bluechips that lagged regional peers, which had rallied in the opening half of the year, with sentiment further buoyed by an MSCI upgrade.
In Saudi Arabia, the benchmark slipped 0.1 percent, but closed the quarter up 5.2 percent. Growth concerns for Saudi banks and petrochemical shares have kept the market from matching the rally experienced by other regional exchanges.
BY comparison, Morgan Stanley's emerging market index lost 9.1 percent in the second quarter and its frontier market index ticked up 0.7 percent.
In Kuwait, the index dropped 1.8 percent as investors adjusted their portfolios at the end of the quarter, said Fouad Darwish, head of brokerage at Global Investment House. However, the market still rose 15.6 percent in the second quarter, mainly driven by retail investor interest.
Elsewhere, foreign investors lifted Egypt's bourse to a near-three-week high ahead of anti-government protests on Sunday but trading volumes were thin as many investors opted to stay out of the high-risk market.
Opponents of Islamist President Mohamed Mursi have planned protests on Sunday to mark the first anniversary of him taking office. Major rallies were not expected before late afternoon and streets in major cities were quiet as the working week resumed.
The index climbed 1.4 percent to its highest finish since June 11 but recorded its worst monthly performance since November 2012. Foreign investors were net buyers, against local and Arab sellers, according to bourse data. Foreign funds often buy Egyptian stocks when political tensions are high, expecting the market to recover in following sessions. But thin volumes suggest very few optimistic bets are being placed.
"Investors are shying away with a wait-and-see approach, bearing in mind the risk involved in today's possible outcome," said Mohamed Radwan, director of international sales at Pharos Securities.