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29 March 2024

Foreign investors step up exposure on DFM in May

Foreign investors ended May as net buyers to the tune of Dh540.7m. (EB FILE)

Published
By Mohamad Al Kady

Foreign investors stepped up their involvement in the Dubai Financial Market in May as they targeted selected stocks in the real estate and construction sectors that achieved strong rallies.

Overseas investment in Emaar Properties increased by 1.45 per cent last month compared with April. Foreign investors were net buyers of 88.4 million Emaar shares worth Dh306.7 million at the current market price. Emaar was the second highest gainer overall on DFM in May, adding 47.66 per cent to close at Dh3.47.

Foreign investors increased their share in Arabtec Holdings by 4.14 per cent, buying 49.5 million shares worth Dh143.6m. Arabtec rallied by 36.79 per cent during the month to close at Dh2.90.

And investors from abroad were net buyers of 90.4 million DFM shares worth Dh145.5m, pushing the share value up 23 per cent last month to Dh1.61.

Drake & Scull International attracted foreign investments worth Dh37m or 42.4 million shares. And foreign investors increased their ownership in Tabreed by 3.14 per cent as they bought 38 million shares worth Dh30m.

A slight increase in foreign ownership was also seen at Shuaa Capital – the DFM's top gainer during May with a share price increase of almost 70 per cent.

The overall trend showed that foreign investors ended May as net buyers to the tune of Dh540.7m – almost double the April figure. Non-UAE nationals bought stocks worth Dh6.296 billion or 42.3 per cent of the total shares bought during May. They sold stocks worth Dh5.755bn, or 38.7 per cent of the total.

Mohammed Ali Yasin, Chief Executive of Shuaa Securities, said the Q1 results were the cornerstone of the change in sentiment among foreign investors.

"The results showed that the macro story in the country, and the whole GCC region, was improving and the effects of the global financial crisis on the local economy are over and looks as if it is recovering.

"Due to their previous experience in the region, foreign institutional investors have strong relations with the managements of publically-listed companies and they have regular meetings, which gave them clear indicators about the performance of these companies.

"If the fundamentals of listed companies continue to improve, along with other areas such as liquidity for the private sector, we will find foreign investors speeding up their accumulation in listed stocks."

Yasin stressed that foreign investors never left the UAE markets entirely, but they reduced their investments due to external factors.

"Foreign investors always looked at the UAE markets as a good opportunity that generated high profits and had the potential for good profits in the future. The financial crisis forced foreign institutions to minimise their investments in regional markets but they always looked at the GCC markets as a top asset class."

Mohammed Al Beheiri, Trading Manager at Amanah Financial Services, said foreign investors have been tracking the DFM general index during the past few months and have been waiting for signals from the market that it is bottoming.

"The level between 1,750 and 1,800 points was critical for the DFM. When the index approached this level last month, the turnover and the number of transactions surged sharply. The market broke through this critical level, which improved sentiment among investors and increased confidence that the DFM will be able to continue its rally.

"Foreign investors were targeting this level as the base for their accumulation in the market. Strong buying interest among foreign investors, institutions and individuals was seen when the index was heading to this level. Yesterday, the DFM cleared this area and we saw very high turnover.

"This trend gave a very important signal about the return of trust among foreign investors in the DFM. Though recent recommendations by some research and rating entities regarding the outlook of the UAE stock markets compared to their GCC peers were negative, we saw foreign investors ignoring these recommendations and rushing to buy in the market following recovery indicators."

The DFM also witnessed some developments in May that attracted new liquidity. The index had been moving in a narrow range with high volatility and sharp fluctuations from the beginning of the year, which worried investors. The market ended April down by 1.88 per cent compared with the beginning of the year.

However, the sentiment improved dramatically during May as the market added 14.78 per cent year-to-date. Last month the index added 17 per cent. Analysts see this development as a major factor behind the return of liquidity to the market. Yasin added: "The market started to give good returns during May. This attracted new liquidity. Unfortunately a significant part of this liquidity targeted short-term investments and speculation. But the fact that the market could attract this liquidity was a good signal."


Turnover rises but number of deals drop

Turnover increased by 6.9 per cent in May compared with April – but the number of transactions declined by 10.9 per cent to 163,700 deals, compared with 183.800 deals in April.

Analysts attributed the decline in the number of deals to the increasing activities of foreign institutional investors.

"Despite the drop in the number of deals, the average value and volume of each deal surged significantly last month," said Mohammed Al Beheiri of Amanah Financial Services.

"This shows that foreign institutions were accumulating at highs."

He said the accumulation of shares by foreign investors would lead to an increasing number of transactions in the market in the short term.

"We are expecting foreign investors to inject more liquidity into the market during the coming few weeks. Apart from supporting the DFM index, this liquidity will push forward the market's daily turnover. Mohammed Ali Yasin agreed that the general level of trading activity on the UAE stock markets might increase during the coming few weeks.

"Foreign investors are very active in the markets and their share of total transactions exceeded 40 per cent during some sessions," he said.


'Caution is the word'

Stock markets in the UAE and the rest of the region will continue to fluctuate until the beginning of July when a clearer view of long-term trends will emerge, said an analyst.

"The Abu Dhabi and Dubai stock markets have gained momentum over the past few weeks but investors should be cautious as the current recovery is still in the fluctuating phase," said Ziyad Al Dabbas, a financial consultant at the National Bank of Abu Dhabi.

"Marginal gains and instability on the markets will remain the trends over the coming weeks for three major reasons – the performance of the global economy, local factors and the companies' second quarter results."

"The economy continues to feel the impact of the slowdown in the real estate sector, which has seen illogical speculation over the past two years.

"Some banks and developers contributed to the crisis, which has harmed many ordinary people and investors. The current gains should be welcomed, but cautiously, otherwise no lessons will be ever be learnt."

He said the recent rise in the international price of crude oil had boosted local and regional markets.

"This could be an important factor in terms of where the markets may be heading over the next few months. Crude prices and other raw material costs reached their peak last summer and the months that followed were severely negative for the markets.

"The current correction in the real estate market will take time as well," said Dabbas.(Rami Eljundi)

 

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