DFM turnover drops amid weak sentiment

The Dubai Financial Market (DFM) yesterday hit its lowest turnover in almost two months amid weak transactions and low volumes, as investors remained on the sidelines while the long weekend in the international markets kept foreign fund managers away.

Turnover dropped sharply with 83.6 million shares worth Dh168.8 million changing hands during the session, the lowest since March 4. Transactions were weak and movements in most leading active players were limited, which reduced speculators' ability to get quick movements.

Turnover dropped in a bout of general weakness in the market and the DFM index lost 15.61 points, 0.9 per cent, to close at 1724.27 points. The market moved into the negative territory since the opening and remained down throughout the session.

"There is a deep lack of movers on the DFM at present. In general, trading was very weak and investors remained outside the market," said Marwan Shurrab, Vice-President of Gulfmena Alternative Investments.

"Local investors remained on the sidelines while foreign fund managers were away on a long weekend. This situation may continue today with most leading global markets on holiday.

"There are differences in Q1 results so far and the market reacted negatively to disappointing results, leading to more pressures on the index," said Shurrab.

The negative sentiment was triggered by disappointing first quarter results of some leading active stocks, such as the DFM stock, after the company announced a drop of eight per cent in its net profits during the first three months of the year compared with the same period in 2009. The DFM stock led the downside movements in early trading, falling to Dh1.72 before it could recover some of its losses to close at Dh1.73, losing 2.26 per cent.

Real estate and construction stocks also added downside pressures on the DFM, as bellwether Emaar disappointed speculators who were trading on expectations that it might distribute dividends for earnings in 2009. However, the company's AGM decided to transfer the profits to the regulatory reserve and not to distribute any profits to shareholders for earnings in 2009. Emaar lost 1.28 per cent to close at Dh3.86.

"It was widely expected that Emaar would not distribute any dividends for 2009 due to the market conditions," said Mohamad Al Beheiri, Trading Manager at Tadawul Shares and Bonds Mediation. "However, some speculators were buying the stock in anticipation of surprises, so Emaar's decision disappointed them and they dumped the stock yesterday.

"Despite these movements, selling pressures on Emaar were very limited as most investors were expecting this action from the company and the impact was very limited. The main issue in the market is the lack of strong movers as Q1 results are still weak and investors are waiting outside for indicators and a clear direction in the DFM," he added.

However, Wadah Al Taha, a senior market analyst, said the performance of listed companies during Q1 remained stable compared with results last year.

"There is mixed performance but listed companies had stable performance and this should be a positive indicator in the market.

"The DFM is suffering from information gaps," said Al Taha.

Union properties bucks trend

Union Properties contradicted the general downward trend in real estate stocks yesterday by becoming the top gainer. It added 5.79 per cent to close at Dh0.457. UPP's extraordinary general meeting has approved the extension of a bridge facility worth Dh405 million from Emirates NBD, which was due in December last year, until March 2014.

Also, the meeting approved the extension of a term credit facility of Dh2.058 billion and $188.4 m (Dh692) until December 2013. Investors see this extension of the company's credit facilities as a positive sign to enable the continuation of its projects.

After trading hours, Union Properties announced that its first quarter net profit rose 67 per cent to Dh50m compared with Dh30m in Q1 2009.

Deyaar falls

Deyaar was the top loser on the DFM, retreating 3.1 per cent to Dh0.407. The firm reported a net loss of Dh100m during Q1 2010. Based on the revenue recognition policy of the completed contract method, it achieved revenues of Dh196m during the first three months.

Narrow-range trading

The DFM index is trading in a narrow range near its important support area of 1700-1718 points while facing resistance around 1750 points, according to Mohamad Al Beheiri.

"The index needs to give a strong break above 1750 points to give good indicators of a new upside trend. This will depend on the rest of the Q1 results and the return of positive sentiment among investors," said Al Beheiri.