Dubai's stock market is likely to lag its regional peers in 2010 due to an oversupply of real estate projects, abundant debt and generally poor transparency, Beltone Financial said in a report issued on Wednesday.

Kuwait and Morocco are also expected to do worse than the Middle East and North Africa average next year, while Egypt, Abu Dhabi, Saudi Arabia and Qatar will likely outshine regional peers, the investment bank's Arab Stock Markets Review said.

'We anticipate that the Dubai market will remain under pressure,' the report said. 'Its economic model has lost one of its legs - real estate - despite reports of interest in specific projects, and we see little likelihood of a notable recovery in demand in the foreseeable future.'

In spite of moves to become more transparent, the emirate is still deep in debt and ownership of its entities remains murky, it added.

Abu Dhabi is different: Long-term hydrocarbon revenues, sensible state spending and a willingness to learn from Dubai's mistakes will help the oil-rich emirate's market prosper regardless of what happens in Dubai, the report said.

Egypt, another of the bank's top choices, will likely outpace the regional average thanks to the improving transparency and consumer demand that fuelled its strong showing this year, Beltone said.

Demand for cars, mobile telephone subscriptions and other consumer goods has grown strongly, the report said, making GB Auto, Ezz Steel and Telecom Egypt key stocks for 2010.

Egypt, which has earmarked EGP18 billion ($3.3 billion) in stimulus funds for this fiscal year, should benefit from strong corporate earnings growth - estimated at 14 per cent for the companies Beltone covers - and potential in its financial service sector, the report said.

'Much needs to be done within Egypt to maximise conditions for the private sector to grow faster and to attract non-hydrocarbon FDI (foreign direct investment), but there is much to underpin the attractiveness of the market,' it said.

In Saudi Arabia, a strong pipeline of initial public offerings in 2010 and recent government appointments that may accelerate reforms should help markets maintain their strong momentum next year, the report said.

Qatar, buoyed by growing hydrocarbon revenues and a 'highly imaginative' infrastructure spending programme, should meanwhile be able to reverse its muted 2009 performance, the report said.

Morocco's market is expected to underperform in spite of well managed and relatively transparent companies, due to out-of-date capital controls and a need for further reforms to lure private and foreign investment, the bank said.-Reuters