DUBAI, April 2 (Reuters) - Dubai's index rebounded from a two-month low on Tuesday, although thin trading left investors unsure whether these gains marked the end of a recent downward trend.
Most Middle East markets edged higher in lacklustre trade.
Dubai's measure index climbed 1 percent. About 79 million shares traded, which was 58 percent higher than a day earlier, but still less than half the 2013 average of 177 million shares.
"The market was very quiet so it's very difficult to say this marks a change in trend," said Sebastien Henin, portfolio manager at The National Investor. "Maybe some investors think the market has fallen enough."
The index has declined in four out of six sessions, reducing year-to-date gains to 13.6 percent.
It is down 5.3 percent since Feb. 24's 39-month peak and has broadly followed a similar pattern to 2012 when an early-year surge gave way to a sustained slump from early March.
But those bald numbers fail to show a crucial difference this year compared to last, said Henin.
"Last year, it was speculative money coming into small- and mid-cap stocks that pushed the market higher, but this time it's only about three or four large stocks - the quality names - that are responsible for most of the rally," said Henin.
Therefore the market can better hold onto its early-year gains as these are backed up by company fundamentals, with Emaar Properties, bank Emirates NBD and telecom operator du the main drivers of the rally.
Emaar climbed 3 percent and Emirates NBD added 1 percent, but du fell 0.4 percent. All are up more than 30 percent this year.
Oman's index rose 0.7 percent to rebound from a five-week low. It is down 2.7 percent from March 26's 22-month high.
The recent slump was due to investors booking some early-year gains as well as many stocks going ex-dividend, said Adel Nasr, United Securities brokerage manager.
Investors used these cash dividends to buy back stocks at lower prices, driving Tuesday's rebound.
"It's speculation on first-quarter results," said Nasr. "If earnings beat expectations I would expect the market to rally to the end of the year."
Many investors have targeted the likes of OM Invest and Oman National Investment Corp Holding (ONIC), because these companies invest in Gulf equities and so should benefit from a broadly positive regional trend this year.
OM Invest and ONIC climbed 5.5 and 3.1 percent respectively.
Saudi Arabia's index rose for a sixth session in eight, but will remain in a sideways range as investors are unsure how best to profit from the country's growing economy, which is forecast to expand 4 percent in 2013.
"Saudi has one of the best stories from a macroeconomic perspective, but taking a position on that is trickier because the largest sector - petrochemicals - is not really related to the domestic economy," said Henin. "People are hunting for domestic plays."
That would normally make consumer stocks a target, but these have already rallied, said Henin.
Investors are also wary of banking stocks, Saudi's other heavyweight sector, due to worries that provisions and tight net interest margins will constrain profit growth.
Telecoms is attracting little interest - No.2 operator Mobily is near a six-year high and former monopoly Saudi Telecom Co has been making negative headlines after a second chief executive quit in less than a year last month and its fourth-quarter profit fell 79 percent.
Egypt's main share index fell 0.4 percent, its third straight decline, to slump to a 16-week low.
"Bearish momentum is slowing down," wrote Pharos brokerage.
* The index fell 0.4 percent to 5,037 points.
* The index climbed 0.2 percent to 7,173 points.
* The index gained 0.3 percent to 6,760 points.
* The index rose 1 percent to 1,843 points.
* The index fell 0.04 percent to 3,007 points.
* The index climbed 0.6 percent to 8,549 points.
The index rose 0.7 percent to 6,010 points.
* The index climbed 0.07 percent to 1,092 points.