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23 April 2024

ADSM shows signs of a stronger rally than DFM

By Matt Smith



The Abu Dhabi Securities Market (ADSM) appears set for a stronger rally than its Dubai counterpart, analysts say.


Both markets are trading above their 15-day averages, but Abu Dhabi is also above its 30-day average, which indicates the capital’s bourse is in ruder health.

Daily averages are used to gauge support levels in the market. The longer the average period, the greater the support.


The Dubai Financial Market (DFM) closed up 0.29 per cent at 5,752 points on Sunday, which is just below its 30-day average of 5,779, so a small increase today would see it match Abu Dhabi’s technical achievements.


However, the ADSM’s fundamentals are stronger and its valuations are lower, which makes it better set for a rally, brokers claim.


“Abu Dhabi looks poised for a major move – it could even be vertical,” said Mohamed Alami, relationship manager at Naeem Shares and Bonds.


“That is not to say it could not yet fall today, but in the medium term the market is very strong.”


Alami backs up his claim with statistics, pointing out that the ADSM enjoyed significant increases in daily turnover for five consecutive sessions last week, before volumes fell slightly on Sunday to Dh1.6 billion.


This volume is four times the turnover of a week ago.


Alami said: “Abu Dhabi’s fundamentals are outperforming all other emerging markets. While many stocks are trading at a slightly high price to earnings ratio, these are growth companies with massive potential.”


Speculators favour Dubai, despite the ADSM currently offering more potential, so the DFM is not expected to be too far behind in any rally.


“Dubai is moving further into a consolidation zone, which is always good news and shows the continued strength of the market,” said Alami.


A key part of this has been Emaar’s stabilisation around the Dh11.30 mark.


The ADSM added 0.24 per cent to end on 4,785 points on Sunday, with the usual suspects from the energy and real estate sectors the most in demand stocks. These include Arkan, which claimed almost half the traded value to surge 5.69 per cent to Dh4.27.

Sorouh and Aldar were two other top traders, although this pair made limited gains of less than one per cent.


The two domestic markets will move together in the short term, analysts say, although major acquisitions in the energy sector could provide another reason for the capital to eclipse its domestic rival.


“Abu Dhabi has been all about oil and property in terms of what investors have been buying for the past few months and I don’t see that changing,” said Alok Nawani, Mac Sharaf Securities equity investment analyst. “For now Taqa appears set for a less aggressive year compared to 2007, but could make some major announcements in the first half of 2008.


“Aabar is selling its one remaining subsidiary, so we are waiting to see what it’s going to do next.”


Meanwhile, Emaar fell 0.43 per cent to Dh11.35 after Dh228 million of its shares were sold.


“Emaar is flat and investors are wary of making any major moves, but it’s attractively priced,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager.

While volumes were better than the recent average, with combined turnover topping Dh3.4 billion on Sunday, more trading will be required to move the market beyond its current trading range.


Some brokers say the Dh5 billion mark will have to be breached for a market breakout.


“High volumes are needed for about three sessions to break the resistance level of 5,800 and to see a real uptrend,” Wadah Al Taha, head of research at Emaar Financial Service, told Dow Jones.



Blue-Chips Steal the Show


The UAE blue-chip stocks stole the show on Sunday, with rumoured and actual dividends prompting much of the action.


Arabtec was Dubai’s top performer ahead of a board meeting where the construction giant was expected to announce a bumper dividend. It climbed 5.3 per cent to Dh11.95.


“Arabtec, like Air Arabia, tends to trade above what its fair value would warrant,” said Alok Nawani, Mac Sharaf Securities equity investment analyst. “It’s one of the stocks strongly favoured by investors, which means it’s priced at a premium, but it tends to catch up with its fair value pretty quickly.”


The DFM, which yesterday announced plans to pay a dividend of 10 fils per share, climbed 1.01 per cent to Dh5.67. Meanwhile, etisalat fell 0.41 per cent to Dh24.55, with just Dh622,000 worth of shares changing hands as investors wait for the telecoms operator to allow foreign ownership of its stock.


Nawani said: “I believe etisalat will have to allow foreign ownership in the near term because it’s expanding so rapidly and will need more money to be able to continue its move into the region.

Consolidation is driving the telecoms industry and so etisalat will require resources to remain one of the largest regional players.”