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Consolidations tip market for rally by mid-March

By Matt Smith


Investors may have to wait until mid-March for the Dubai bourse to mount a significant rally, analysts predict.


While many traders may be impatient for the index to make a move after remaining range bound for much of 2008, analysts say this period of consolidation is strengthening the market for a major rally as the end of the first quarter approaches.


The Dubai Financial Market climbed 0.06 per cent to 5,928 points on Tuesday as volumes topped Dh2 billion, with brokers reporting increased flow from foreign funds.

“The market looks good, but investors are cautious,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager


“A lot of stocks are hovering around resistance levels. Retail players are reluctant to buy and institutions believe they can accumulate at lower levels, so the market is flat at the moment.”


The Dubai index tailed off in late trading as some retail investors booked profits. However, most traders were unwilling to sell, which kept the market in the black.

“It was more of the same on the market, which is continuing to move in a slight upward sideways range,” said Mohammed Ali Yasin, Emirates Securities managing director. He added that smaller brokerages are reluctant to allow retail investors to take up new leveraged positions with the end of the month approaching.


“The market is building up a base and awaiting some positive news,” said Yasin. “Nothing major is likely to happen over the next two weeks, but there could still be some surprises.”


Emaar fell 0.39 per cent to Dh12.60 as hopes for improved volumes failed to materialise, with just 21.3 million Emaar shares changing hands. The property developer has built a strong prop at Dh12.25, but lacks the momentum to move over the troublesome Dh12.80 barrier.


“Investors are reducing their Emaar stakes to take up larger positions in rival developers like Sorouh and Aldar,” said Khalek.


Amjad Bakir, Mac Sharaf Securities trading manager, tipped Emaar, Dubai Investments, Tamweel and the DFM as stocks to watch, with investors making major accumulations at current price levels. This indicates these stocks may be about to break upwards.


“If Emaar can close above Dh12.85, the road’s open to Dh13.40,” said Bakir.


Dubai Investments fell 0.17 per cent to Dh5.77 yesterday, while Tabreed ended unchanged at Dh3.33. The latter is trading at 10 per cent below its year-best close.


The DFM’s own stock dropped 1.1 per cent to Dh6.26, having hit an intraday high of Dh6.41, with the Dh6.40 proving a tough resistance point to break.


Emaar’s mortgage unit Amlak Finance has been in doldrums since announcing its full- year results in mid January. Yesterday it closed down 0.81 per cent at Dh4.87, but Bakir tips it to break Dh5.20 in the near term.


Shuaa Capital was among Dubai’s star performers, jumping 4.96 per cent to Dh6.97 –  its best close for more than a month and it is now just four fils below a 52-week high.


“Shuaa is right at its foreign ownership limit, but there’s always demand from overseas institutions so these must have found some sellers and this pushed the price up yesterday,” said Khalek.


Meanwhile, the ADSM broke a two-day losing streak to rise 0.71 per cent to 4,840 points. The capital’s bourse is struggling to challenge its next resistance mark of 4,900 points, but Mac Sharaf’s Bakir predicts the index will soon overcome this. He predicts it will challenge 4,950 by the end of next week.


Not surprisingly, he believes real estate and energy will lead the charge.



6,000-point proving to be stubborn barrier


The 6,000-point mark is proving to be a stubborn barrier for the Dubai Financial Market, both from a psychological and technical point of view.


“The market is stuck in a one per cent range,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager.


“Most of the high net worth traders, together with institutions, are holding their positions ahead of the first quarter forecasts.


“Investors who rely on fundamental analysis will then use these figures to make full-year projections and shape their strategies accordingly, so things will be quiet for the time being. The market will rally in the second half of March and into April,” said Khalek.


The Dubai bourse could yet break 6,000 points this week, according to Amjad Bakir, Mac Sharaf Securities trading manager, with 6,080 and 6,100 the targets thereafter.

However, a move above this level is unlikely to herald an immediate significant rally, with Bakir, like Khalek, not expecting much action before late March.


A move downwards also cannot be ruled out, although analysts agree this is unlikely.


If this were to happen, the DFM would find support at 5,880 points, then 5,820 and 5,720.