DUBAI, June 11 (Reuters) - Markets in the United Arab Emirates resumed gains on Tuesday, although trading was volatile as an early-year surge in share prices faltered.
Dubai's index rose 0.6 percent, having been down as much as 0.9 percent in early trade.
That initial drop followed a 2.3 percent decline on Monday, Dubai's largest in 15 months, but low volumes - less than 20 million shares changed hands in the opening 30 minutes, considerably below recent norms - indicated that few investors were willing to sell at those prices.
Trading then picked up as stocks rebounded.
"The market, as expected, is volatile and there's no clear trend at the moment," said Sebastien Henin, portfolio manager at The National Investor.
Dubai is up 45.3 percent in 2013 and Abu Dhabi has gained 35.6 percent over the same period, with this surge likely to give way to more sustained profit taking eventually.
A potential trigger for a sell-off may be MSCI's decision on whether to upgrade the UAE and Qatar to emerging market status. The index complier will announce its verdict at 2100 GMT.
"The market will correct whether we get upgraded by MSCI or not - it's more of a short-term consolidation period as we come closer to the summer," said Musa Haddad, head of investment advisory services at National Bank of Abu Dhabi.
"The market still looks very strong, volumes are positive and liquidity is available, which shows the longer-term upward trend isn't about to change."
MSCI has opted against upgrading the UAE and Qatar from frontier markets classification on multiple occasions since 2009, but traders are hopeful the UAE will make the cut this time following market reforms.
An upgrade would likely attract additional foreign money to UAE stocks, although the country's weighting on MSCI's emerging market index would be less than 1 percent so the impact could be limited.
"The big question is how the market would react after the announcement," added Henin.
Long-term investors will likely use any market pull-back to accumulate shares at lower prices, said NBAD's Haddad.
"We expect the market to have further upside this year, but at this point in time it will be in a consolidation phase," he said.
Emaar Properties was Dubai's main support, rising 0.7 percent.
Emirates NBD fell 1.9 percent. Dubai's largest bank said on Tuesday it had completed the acquisition of BNP Paribas' Egyptian assets after receiving regulatory approval in the North African country.
Egypt's bourse rose 1.5 percent from Monday's 10-month low, ending a seven-session losing streak. Trading fell to a week-low, with investors wary due to ongoing political instability in the Arab world's most populous country.
Protesters are preparing for mass demonstrations on June 30 to mark President Mohamed Mursi's one-year anniversary in office.
"Egypt's market is driven by political factors and whenever politics is the main driver, we would rather stay away," added Haddad.
* The index rose 0.6 percent to 2,358 points.
* The index climbed 0.3 percent to 3,567 points.
* The index rose 1.5 percent to 4,849 points.
* The index slipped 0.2 percent to 9,355 points.
* The index fell 0.7 percent to 7,583 points.
* The index climbed 1.3 percent to 8,029 points.
* The index rose 0.4 percent to 6,657 points.
* The index climbed 0.3 percent to 1,200 points.