The topic occupying the minds of investors this week will be how much worse the stock markets in the Mena region can get.
If Saudi Arabia's dramatic rally yesterday is any sign, the answer may be: "not much".
Having lost 15 per cent last week to hit a 22-month low as traders fled the markets in the wake of unrest sweeping the region, the Tadawul All-Share Index surged 7.3 per cent yesterday to 5,709.91, with some stocks gaining 10 per cent.
The exchange is under particular scrutiny as the largest and most liquid of the region's stock markets. The kingdom is perceived to be vulnerable to social discontent on the one hand, but on the other hand stands to gain from higher oil prices, which have been another product of the changes across the region.
Dubai's main measure, the Dubai Financial Market General Index, slumped to a seven-year low, ending the week 1.6 per cent down at 1,352.24 points.
Qatar's measure ended the week 2.2 per cent down at 7,489.25 points, after struggling to get near the 26-month highs it breached after winning the rights to host the 2022 Fifa World Cup.
The Abu Dhabi Securities Market General Index was among the only ones to end in the black, closing slightly higher at 2,529.82 points.
In Oman, Muscat's measure pared some of the losses that pushed it to a two-year low and finished 0.7 per cent higher at 6,352.23 points.
The ADIB Islamic Index, a gauge of Sharia-compliant companies, retreated 6.5 per cent led by declines in Arabtec Holding, Aldar Properties and Emaar Properties.
The dips were caused by worries that tensions would affect the economies of oil-exporting nations not hit by unrest. Bahrain , which has suffered some unrest, has one of the smallest, least liquid markets in the region. Its stock market fell 2.3 per cent to 1,377.36 points.
Investors will start buying stocks that have more than halved in value, although a catalyst is absent.
The Tadawul is trading at 14 times earnings and, compared with a historic average price to earnings ratio of 20, is looking appealing. The market is dominated by retail investors with only 20 per cent of the market composed of institutional clients.
"Retail clients are the majority that have been selling but now we are seeing big investors look at cheap stocks that are really attractive," said Tariq al Alaiwat, an analyst at NCB Capital in Jeddah.
Even large government agencies, which have not been active in the market over the past six months, bought at least 589 million riyals in securities last month, mainly over the last few days of the month, data from NCB Capital show.
Consumer-related stocks such as the food company Savola are been seen as good buys, said Mr al Alaiwat.
Retail has been identified as one of the best value-for-money sectors on the Saudi market, and is trading at about 12.6 times earnings.
Some Egyptian and Tunisian companies have also emerged as potential beneficiaries of investors exploiting cheap valuations when the markets reopen this week, but not those in the property or banking sectors, where companies may be exposed to legacy effects of the former regimes.
Ann Wyman, the head of Mena equity at Nomura, said investors should avoid banking stocks in particular.
"The combination of the legacy of poor loan quality related to the former regime and the potential for increased non-performing loans [means] markets [in Tunisia] have begun to deteriorate more rapidly," Ms Wyman said. But there will be no buying in the meantime as protests that ousted presidents in Egypt and Tunisia forced the two markets to close after severe sell-offs.
Egypt's bourse was scheduled to reopen today, after 24 business days of closure, but that has been delayed until after consultations with Essam Sharaf, the new prime minister. Mr Sharaf was appointed on Thursday after Ahmed Shafiq stepped down.
Mostafa Abdel Aziz, the head of regional trading at Beltone Financial, said investors should be wary.
"You have to be selective in the names," Mr Abdel Aziz said. "You will not see severe correction [in the price of] say, telecoms stocks or petrochemicals, consumer-related stocks or textiles."
Egypt's bourse fell 16 per cent in the two days before being closed on January 27. Mr Abdel Aziz said the stock exchange was "not the priority of the government at the moment".
Tunisia's index was also suspended for a second time last week, after escalating civil upheaval forced the resignation of Mohammed Ghannouchi, the prime minister.
The suspension will remain in place until further notice, according to the Bourse de Tunis website. Trading on Tunisia's benchmark Tunindex was first suspended on January 14 for two weeks after the ousting of Zine el Abidine Ben Ali, the country's president.
Before Sunday's suspension it lost 11 per cent since trading resumed.
Brent crude oil futures for delivery next month rose US$1.18 to settle at $115.97 a barrel, having reached a high of $116.49.
