Gulf stock markets declined again on Wednesday amid growing fears of a US military strike on Syria , but the dramatic losses repeated early in the morning were largely recovered in an afternoon rally led by opportunistic investors.
Abu Dhabi Securities Exchange almost repeated its 2.8 percent fall on Tuesday, crashing another 2.2 percent to 3737.24.
Saudi Arabia’s Tadawul and Qatar Stock Exchange both closed up despite sharp declines on Tuesday.
The Tadawul had started the day similarly to Dubai, opening down nearly 2 percent but recovered to close up marginally, while Qatar’s stock market plunged nearly 4 percent early on, before quickly rallying to close up 2.29 percent.
Kuwait, which plunged on Tuesday, lost a further 1 percent and Oman, the smallest market in the region, closed down 3.79 percent.
Analysts said opportunistic foreign investors led the recovery in Dubai in a sign there was still confidence in the market.
“Everybody was waiting for a correction but it was not going to come from fundamentals in the UAE economy because they’re quite strong,” MENACORP CEO Fathi Ben Grira told Arabian Business.
“The panic [on Tuesday] was quite irrational so it was [really just] a good excuse for a strong correction. We have a lot of investors who were leveraged so it amplified the selling pressure.”
The DFM had gained more than 60 percent since January when it opened on Tuesday and analysts said leveraged investors had used Syria as a catalyst for cashing in on the huge paper profits recorded this year.
Foreign investors saw “a good opportunity” in the sharp drop.
“Most people started to look and had more confidence in the market so [thought] ‘let’s try to get a good bargain’ so we might have better market conditions tomorrow [Thursday], provided there’s no bad news from Syria.”
Shuaa Capital vice president of asset management Amer Khan, who said on Tuesday the crash could prove to be a good time to buy, said the reaction was “very, very political headline driven” and did not reflect market fundamentals.
“Because the fundamentals in the market haven’t changed, there’s buyers out there,” he said.
“Obviously there’s investors that think some of the [stocks] have attractive evaluations and we saw a bit of a recovery towards the end of the market. So the buyer are there for sure; when exactly they choose to buy will depend on ... the political risk situation in the region.”
A US-led coalition strike on Syria in retaliation to an alleged chemical attack by President Bashar Al Assad’s regime appears increasingly likely, with Secretary of Defense Chuck Hagel revealing the military had presented US president Barrack Obama with "all options for all contingencies" and resources were ready to go if the request was made.
The UK parliament has been recalled and is due to meet on Thursday to vote on its response to the gas attack,  which killed hundreds of civilians.
France also has said it would not “shirk its responsibilities” to act in Syria.
By: Courtney Trenwith