DFM range-bound amid lack of catalysts

The Dubai Financial Market (DFM) ended down yesterday amid increasing volatility and low turnover as speculators continued to control the market, with investors eyeing second-quarter results.

The DFM index witnessed sharp fluctuations yesterday before falling slightly by 5.81 points, or 0.38 per cent, to 1533.17 points. The market opened in the negative area and Emaar led a bounce in the index after it rallied to Dh3.34 during the middle of the session. However, the market lost steam by the end of the session as selling pressures appeared and dragged the index down.

Emaar managed to close in the positive territory at Dh3.27, adding 0.3 per cent. The stock witnessed relatively strong fluctuations between Dh3.25 and Dh3.34. These movements shaped trading on the DFM yesterday.

"Trading continued to focus on Emaar and the stock tried to push the market up but selling pressure prevented the market from maintaining earlier gains," said Wadha Al Taha, a senior market analyst.

"The level of Dh3.35 has become critical for Emaar, as when the stock approaches this level selling pressures increase and drag the stock down."

Turnover remained at very low levels yesterday, with 92.7 million shares worth Dh109.7 million changing hands during the session. Emaar dominated around 40 per cent of the trade value while Arabtec attracted almost 15 per cent. Deyaar was the top active stock by volumes, dominating 35 per cent of the total volume.

Al Taha said the correlation with global markets has started to ease because of the general calm movements during this period of the year. "Global markets were mixed during the weekend but this had a marginal impact on the trend in local markets. "Even banking stocks in global markets, especially the US markets, gained during the weekend after the Congress passed a reform bill of the banking sector, which was satisfactory for the markets. We did not see any impact on local markets from this trend," he added.

Leading active stocks moved in the same direction with Emaar. Arabtec rose slightly to Dh1.90 before it closed down by 0.5 per cent at Dh1.86. The DFM stock managed to close flat at Dh1.55 after it advanced to Dh1.58.

Du was among top losers in the market, going down 4.13 per cent to Dh2.09 after the market allocated the right issued shares of the company to shareholders' accounts.

Fadi Al Said, Head of Mena Equities at ING Investments, said the DFM would continue to move rangebound during the coming few sessions due to the lack of catalysts in the market.

"There are no movers at the current stage so the DFM index is expected to move in a narrow range with low turnover. There is a shortage in liquidity and there are no new cash flows into the market at the current stage. Even in global markets, there are no movers and this is the usual trend during the second quarter of the year and summer months," he added.

"We do not see any indications for strong movements in the near future as investors are still out of the market waiting for new catalysts from global and domestic markets," Al Said explained.

Q2 results likely to have restrained impact

Investors are eyeing indicators for the second-quarter results but it is expected to have a restrained impact due to the natural calm trading seen during summer months.

"We expect the markets to remain range bound until the second-quarter results [are announced] as investors will be watching the financials of listed banks, especially their provisioning. The second-quarter results may provide some catalysts for the DFM in the coming weeks but this will depend on the flow of new cash into the market," said Fadi Al Said. He added that global markets should also give positive indicators to help local markets pick up during the announcement of the Q2 results.

Wadha Al Taha also stressed that Q2 results would have a limited impact on the DFM's trend. "There is deep concentration in the market on a few stocks. Emaar and Arabtec dominated almost 70 per cent of the total turnover last week. However, results of other listed firms will have minimal impacts as the turnover is expected to remain low," he said.

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