DUBAI/CAIRO,(Reuters) – Hopes for an extended rebound of Gulf stock markets have faded once again because of global market turmoil triggered by Greece’s shock decision to hold a referendum on its bailout package.

Early this week, shares in the Gulf appeared to be starting a major recovery, supported by their low valuations and signs that the region is so far coping well with the weak global economic climate. The indexes for Dubai and Abu Dhabi jumped to four-week highs; Qatar hit a five-month high. Increasing trading volumes suggested some investors were returning to the markets, with Sunday’s volume in Dubai reaching the highest daily level since early June.

Data on Monday showed the SABB HSBC Saudi Arabia Purchasing Managers’ Index, which measures activity in the country’s non-oil private sector, rebounded to 56.7 points in October from 56.3 in September, which was the lowest level since the series was launched in August 2009.

But developments in Greece then stifled the markets’ rally and the Dubai index fell back from its 50-day average, which is now at 1,426 points and has capped the market since May. The index ended Wednesday at 1,377 points, in very thin trade.

“We are in this limbo, a high-volatility environment that calls for thinking defensively, thinking selective value and thinking long-term if you have the stomach for it. That’s what you have to go for,” said Haissam Arabi, chief executive and fund manager at Gulfmena Investments in Dubai.

“Our markets will be as much affected as global markets, albeit at slightly lesser levels because we’ve proven to be resilient — especially Saudi and Qatar,” he added.

HOLIDAYS

Gulf markets will mostly be closed next week for the Eid al-Adha holidays; only the United Arab Emirates and Qatari markets will trade during the week, on Wednesday and Thursday. This is likely to keep trading volumes extremely thin.

However, many fund managers think the markets will resume rising after the holidays if there is any positive news from the European debt crisis — for example, if it appears likely that the Greek referendum will approve the bailout.

“We’re watching out for signs of a short-term reversal, which may very well materialise next week given the right (global) catalyst,” said Sleiman Aboulhosn, assistant fund manager at Al Masah Capital in Dubai.

One positive signal in Dubai over the past week has been the strong performance of shares in heavyweight property developer Emaar Properties after it posted a 34 percent drop in third-quarter net profit, a smaller decline than analysts had forecast. The stock surged from below 2.50 dirhams to above 2.75 and pulled back only partially with the overall market in the past two days, ending Wednesday at 2.67.

Saudi Arabia’s market in particular could benefit from any activity by funds accumulating blue chips before year-end book closings, traders said.

“The Saudi market remains one of the most attractive in the MENA region in terms of outlook, combined with a very attractive valuation — 13 times trailing earnings versus a historical 17-plus,” said Saudi Arabia-based Farouk Miah, acting head of research at NCB Capital.

“The appetite is there. If the global economic picture improves, leading to better sentiment, we will see a big move on the Saudi index.”

EGYPT

Egypt’s stock market has been in an uptrend since it hit a multi-year low in early October; it has rebounded nearly 15 percent. It is likely to keep climbing this month, but at a slower pace than in October, said EFG-Hermes strategist Simon Kitchen.

Gains would be driven by factors including the prospect of foreign financial assistance for Egypt. “However, foreign investors will generally remain wary, keeping volumes well below $100 million a day,” said Kitchen.

He said part of the caution among foreign investors was due to concern about the vulnerability of the Egyptian currency , given this year’s sharp fall in the country’s foreign reserves. But valuations are attractive, with Egyptian equities trading at just 1.2 times book value and 7.1 times projected 2012 earnings, he added.

Tarek Abaza at brokerage Naeem said the Egyptian market was unlikely to move more than 1 percent higher or lower next week because of the Eid holidays. The market will reopen after the holidays next Wednesday.