An improved outlook for Arabian Gulf economies, underpinned by buoyant oil prices, is seen keeping regional risk sentiment elevated, but valuations will likely be in the spotlight in the second quarter after several stock markets rallied sharply during the first three months of the year. The Gulf Cooperation Council (GCC), markets added 12 percent, or $86 billion, in value over the last three months, according to data from Zawya.com, as investors snapped up some badly beaten down stocks. The regional rally was led by Saudi Arabia and Dubai with the two markets notching a 22 percent rise each on relatively strong volumes - helping both finish among the top 10 performers globally in the first quarter. Moreover, this was the first time in five years that Dubai recorded a first-quarter gain, while Saudi shares posted their biggest first-quarter rise in the same period. While Saudi Arabia benefited from a positive outlook for the economy, stability and fresh hopes that the stock market will open to foreign investors this year, investors reckoned selling due to concerns over Dubai's ability to service its huge debt pile were overdone, and instead focused on improving fundamentals, analysts say. At the end of the 1st quarter 2012, TASI closed at a level of 7,835.15 points, gained 1,272.3 points (19.39 percent) over the close of the same period of the previous year, Tadawul website noted. NCB Capital noted Monday that the daily traded value during the year that has averaged SR10.3billion - 149 percent higher to the same period in 2011 - has an inverse relationship between nominal stock prices and their contribution to the total market activity. It said stocks with nominal prices under SR15 have accounted for 34 percent of the total traded value, up from an average of 18-19 percent in 2010-2011. It further noted an inverse relationship between the nominal stock prices and their year to date performance, saying that stocks with nominal values between SR0-15 are the best performers YTD (up 67 percent on average against 20 percent for the TASI), whereas stocks which have nominal values above SR90 are only up 5 percent on average during the same period. In terms of volatility, NCB Capital noted the that the relationship change between the standard deviation of daily stock price and the nominal stock prices to be inverse i.e. the lower the nominal price of a stock, the more volatile the stock price is expected to be. In terms of range, the SR0-15 category stocks have on average increased 2.16 percent on a positive day and decreased 1.31 percent on a negative day. However, the SR90+ stocks have on average risen 0.71 percent on a positive day and decreased 0.81 percent on a negative day. On an YTD basis TASI registered a positive increase of 22.09 percent (1,417.42 points). Highest close level for the index during the period was 7,835.15 points as of March 31, 2012. Total equity market capitalization at the end of the 1st quarter 2012 reached SR 1,539.61 billion ($410.56 billion), increased by 16.72 percent over the same period of the previous year. The total value of shares traded for the 1st quarter 2012 reached SR 684.71 billion ($182.59 billion), increasing by 163.07 percent over the same period of the previous year. Abu Dhabi and Kuwait added some 6 percent each during the quarter, but the other regional markets were relatively quiet. Doha-the top regional performer last year, Oman and Bahrain finished almost flat for the quarter ending March 31. On a pan-GCC aggregate level, the markets are now trading at a price to earnings ratio, or P/E, of 12.83, according to Zawya.com, compared with a global emerging market P/E of about 11.95. Oil prices staying firmly above the $100 a barrel mark have helped justify some of the current valuation premium for regional stocks, but investors are likely to look for fresh catalysts such as first-quarter earnings. Analysts at EFG Hermes expect Middle East and North Africa company earnings in the first quarter to be flat on year, but rise 10 percent versus the previous quarter on the back of falling provisions. "On a country basis, we believe only Saudi Arabia, Kuwait and Oman will deliver year-on-year earnings growth," EFG said in a client note Sunday. Separately, US stocks closed higher Monday after a positive report on US manufacturing. The S&P 500 closed up 10 points at 1,418. The Dow closed up 52 at 13,264. The Nasdaq finished up 29 at 3,119.