Stock markets in the UAE and Qatar bounced back on Tuesday after a steep slide over the past month made some valuations attractive again.

Fund managers said it was not clear that any extended uptrend in the markets was starting; after the volatility of the past month, shell-shocked investors may be keen to sell into rallies. The fighting in Iraq and the traditional trading lull during Ramadan may also dampen the markets.

However, Tuesday's rebound suggested Gulf markets might finally be bottoming out. Qatar's bourse led the way on Tuesday, surging 5.6 per cent, its biggest daily jump in five years, as all index components rose. Lender Masraf Al Rayan was the top gainer and the main support, soaring its 10 per cent daily limit.

The market declined almost non-stop throughout last month, falling 15 per cent from its May 29 peak, because of heavy profit-taking which followed MSCI's upgrade of Qatar and the UAE to emerging market status at the end of May.

In Qatar, the pull-back was exacerbated by allegations of corruption, which the country denies, in its winning bid to host the 2022 soccer World Cup. But Qatar's booming economy is unlikely to suffer even if it loses the tournament hosting rights, and the market's decline brought many stock prices into line with fundamentals, fund managers said.

"After the declines in Dubai and Qatar there are a lot of names that look remarkably attractive from the valuation perspective," said Amer Khan, senior executive at Shuaa Asset Management in Dubai.

Top Qatari lender Qatar National Bank, for example, closed up 6.7 per cent on Tuesday at 174.2 riyals - still well below a median target price of 215 riyals given by 15 analysts surveyed by Thomson Reuters. At its peak in May, the stock was only 8 per cent below that target.

Simlarly, conglomerate Industries Qatar is now 9.7 per cent below analysts' median target price; at its peak, the stock traded above the target.

Companies in Qatar will start reporting their second-quarter earnings next week, followed by firms listed on other Gulf markets. Investors hope the earnings reports may confirm a bottom for the markets.

"People expect Qatar's banks and real estate companies to outperform the first quarter," said Fouad Darwish, head of brokerage services at Global Investment House in Kuwait.

Soon after Qatar surged, Dubai's bourse made a spectacular turnaround and closed up 3.2 per cent, after tumbling as much as 5.4 per cent during the session.

The benchmark closed at 4,068 points, bouncing back above its 200-day average at 3,866 points, which is seen as an important technical indicator. Earlier in the day the index dropped below the 200-day average for the first time since December 2012, when a bull market was just about to begin.

Blue chip Emaar Properties jumped 5.8 per cent while construction firm Arabtec, which earlier fell its 10 per cent daily limit, surged 10.3 per cent.

At 8.90 dirhams, Emaar is now 21 per cent below 14 analysts' median target price of 10.80 dirhams. In May, the stock peaked at 11.10 dirhams.

Shares in Arabtec had previously plunged 67 per cent, dragging down the entire Dubai market, as margin calls issued by brokers to leveraged retail investors exacerbated a decline triggered by management turmoil at the company.

Market players said the bulk of margin calls in Arabtec had probably been filled now, easing pressure on the stock, while rumours that a government-related entity would buy a large stake owned by its former chief executive helped drive up the price.

After trading closed, Arabtec said in a brief statement it would hold a news conference on Wednesday to answer investors' questions and address rumours about the firm.

Dubai's recovery helped Abu Dhabi, where the main index rose 0.6 per cent. Abu Dhabi Commercial Bank was the main support, jumping 7.7 per cent to 7.60 dirhams. The stock, which traded above analysts' median target price of 8.55 dirhams in May, is now 13 per cent below it.-Reuters