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05 December 2023

DFM plunge sees Dh15.4bn in value wiped out

By Matt Smith
Stunned investors saw Dh15.4 billion wiped off the value of their shares yesterday as the Dubai Financial Market plunged 3.84 per cent to bring its stuttering recovery to shuddering halt.

The DFM’s General Index lost 218 points to end the day at 5,451.05, confounding analysts’ expectations it would build on Sunday’s gains to continue a limited resurgence.

Instead, the market’s blue-chips tumbled as investor confidence took another battering.

The DFM’s own stock dropped 6.82 per cent, while Tabreed and du fell 5.86 and 6.82 per cent respectively.

The market slumped despite volumes being roughly the same as Sunday’s, with total turnover topping Dh2bn. The downturn was felt across all sectors, although Gulf General Investments was one of five stocks to escape the turmoil, adding 4.76 per cent.

Continued global volatility is sapping local confidence, while foreign institutions are selling UAE stocks to take profits where they can. “It’s clear the smart money has left the market,” said Amjad Bakir, Mac Sharaf Securities trading manager.

“Because Dubai didn’t hold above 5,720, it retraced back to 5,451, and from here the next support levels are at 5,440, 5,415 and 5,400 points.

“Foreigners are largely out of the market and we saw some major panic selling in the final half hour’s trading in Dubai.”

Emaar endured a torrid day, plunging 5.74 per cent to close on Dh12.30. Technically, the stock could rebound to Dh12.80 tomorrow, but if, on the other hand, it falls again, the property developer could drop as low as Dh11.50, Bakir warned.

“Emaar has not said what it will pay in dividends for 2007. It may be the firm won’t pay dividends and use the extra cash for its business,” Wadah Al Taha, Emaar Financial Services head of research, told Dow Jones.

He said Emaar affected the whole market at a time when the investor confidence had been bruised from last week’s market crash.

“The market was not able to break through the 5,750-point resistance barrier – we have yet to escape the correction of the past two weeks,” said Sherif Abdul Khalek, Al-Futtaim HC Securities dealing room manager.

“Locally, we have a mixture of retail investors, who are currently afraid of investing heavily, and institutions, which are waiting to see which way the market is heading.

“Many of the latter think there might be opportunities to buy at lower prices, while some funds are accumulating now.”

There was little to cheer in the capital either, with the Abu Dhabi Securities Market (ADSM) falling back after breaching the 4,720 resistance level in early trading.

By the close, Abu Dhabi was down 1.14 per cent to 4,630 points, with volumes totalling Dh1.3bn. The capital’s energy stocks made gains in the opening hour of trading, only to be dragged down by the losses in other sectors, said analysts.

“I can see the ADSM going down to 4,500 points, although there are at least four support levels before it would reach this figure,” said Bakir. Etisalat fell 2.24 per cent to Dh23.95, but should see some improvement today after announcing a 19 per cent jump in full-year profits for 2007. The telecoms operator is hampered by regulations banning both foreign and institutional investors, which means the stock is the sole preserve of UAE retail players.

Amlak Finance was another stock to suffer, falling 5.13 per cent to Dh4.43.

Global trend to affect markets today

UAE investors will be nervously watching the Far East markets today, while overnight news from the US could also decide the immediate fate of the local exchanges.

“Expectations for today will still depend on the global market situation,” said Amjad Bakir, Mac Sharaf Securities trading manager.

“Uncertainty will lead to a flat market, with Dubai trading in a maximum range of 500 points, which allows for a 10 per cent swing.

“Normally, there’s no correlation between the UAE markets and their global counterparts, but this is what’s happening right now. UAE markets are more closely tied to the US and Asia, than they are to Europe,” Bakir added.

Abu Dhabi looks better equipped to ride out a sustained worldwide equity plunge, with the capital home to fewer foreign and speculative investors.

“Abu Dhabi is moving in the same direction, but technically it’s looking much better,” said Sherif Abdul Khalek, Al-Futtaim HC Securities dealing room manager.