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28 May 2023

Asia pulls down UAE markets

By Matt Smith


Turmoil in the Tokyo market led to losses in Dubai and Abu Dhabi yesterday as tumbling Asian stocks once again unnerved investors.

While the fundamental correlation between the UAE exchanges and the major global markets is minimal, the sentimental link remains stubbornly strong.

The UAE bourses saw more than two-thirds of Wednesday’s 140-point gains wiped out yesterday after the flagship markets of London, Japan, New York and Hong Kong all declined.

The Nikkei was worst hit, plunging 3.33 per cent to a 30-month low.

The Dubai Financial Market lost 1.13 per cent yesterday to end the week on 5,754 points, while the Abu Dhabi Securities Market fared little better, dropping 0.68 per cent to 4,732.

Combined volumes fell by more than half to Dh1.38 billion, with Dubai claiming Dh801 million of this total.

“Today’s fall was expected,” said Ayman El Saheb, Darahem Financial Brokerage director of operations.

“Wednesday’s gains were no sign that liquidity had returned to the market and it’s important to consider the origins of these funds – are they in it for the short term or not?

“For example, Dubai’s first hour on Wednesday saw Dh700m traded, which was close to yesterday’s turnover for the entire session.”

Saheb said he was baffled by investors’ current behaviour, with traders seemingly correlating the United States Federal Reserve’s $200bn (Dh734bn) rescue package for the American markets as good news for the UAE.

“The two economies couldn’t be more different, with the US teetering on the brink of recession and the UAE enjoying a boom.”

Emaar failed to hold above Dh12, losing 2.05 per cent to Dh11.90 as investors cashed in Wednesday’s gains.

Union Properties, Wednesday’s star stock, fell 2.08 per cent, while more importantly, the DFM lost further ground, slipping 1.5 per cent to Dh5.85.

Dubai’s other blue-chip companies’ stocks also struggled to make any headway, with du and Dubai Islamic Bank falling by more than one per cent, while Mashreq and Emirates National Bank of Dubai were unchanged.

In the UAE capital, the top five traded shares by turnover declined. Aldar Properties and Sorouh Real Estate lost 1.82 and 2.35 per cent respectively, while Aabar plunged 4.32 per cent.

The gainers’ chart was largely the preserve of low volume shares, although etisalat did rise for the second successive session, climbing 0.21 per cent to Dh24.10.

Saheb said: “The thing holding us back is the negative sentiment that started with the foreign institutions. UAE companies have announced very good dividends and yet the market seems little moved.”

With dividend record dates fast approaching, this would normally spark heavy trading as investors snap up the big-paying stocks, but this has not happened.

“Aramex announced a 10 per cent dividend and is trading at around Dh3 per share, so it should have seen a bounce in its share price, but instead it’s fallen – it’s peculiar,” said Saheb.

Aramex has fallen by 5.4 per cent since March 4 and closed down 0.66 per cent at Dh2.99 yesterday.

Further afield, the Kuwait and Oman exchanges posted new record highs, but Bahrain and Qatar both suffered limited losses.

Analysts have said earlier that economic recession in the United States would not affect regional markets.