The Dubai bourse bounced back yesterday, ending a three-session losing streak as bargain prices attracted buyers for its heavyweight stocks.
After a dire Sunday, investors’ worst fears looked like coming true yesterday as the Dubai Financial Market immediately fell upon opening, but a strong early rally on the Saudi index helped steady these jitters.
A stop-start first hour gave way to heavy buying, propelling the DFM to a close of 5,352 points, up 1.96 per cent. The top-traded shares all made gains, most notably Emaar and the DFM’s own stock, which increased by 0.92 and 3.65 per cent respectively. Turnover was also above the March average, with 285 million shares worth a combined Dh1.24 billion changing hands.
“Most institutions couldn’t resist the very attractive prices and this is what drove the market back up,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager. “With Emaar trading at below Dh11, this is around its book value and many investors decided this was a good time to buy.”
Khalek also highlighted Dubai Investments as a stock picked up by bargain hunters yesterday. The company slumped to an intraday low of Dh4.85, before closing at Dh5.02, up 0.4 per cent.
Khalek said: “Yesterday’s prices were attractive for accumulation in the longer term. The market is pretty slow, which means institutions can build their stakes gradually without forcing the price up too much.”
In Dubai, there was heavy buying for most of the last hour of trading, although selling took over in the final 15 minutes as
brokers closed margin positions for end of month reporting.
Happily for most investors, buyers’ appetite remained strong enough to support prices, despite the sell-off.
“I’m not expecting Dubai to make any further significant declines,” said Mohamed Alami, Naeem Shares and Bonds international desk manager.“Dubai should continue in a sideways movement for the next week at least, making minor gains. The market should improve little by little over the coming weeks.
“The DFM is resting on a major support level and with the start of the second quarter, we should an increased news flow.”
Alami advises conservative investors to stay out of the market for the time being, saying these players were likely to be happier paying higher prices with lower risks, a scenario which is likely to become reality in late April.
“I also wouldn’t initiate any sell positions at the moment,” said Alami.
“It would be very risky to get rid of stocks right now – the market could turn around at any time, but it’s impossible to say exactly when.”
Alami is bullish about the market’s long-term health, predicting an influx of foreign liquidity once international financial exchanges stabilise.
He added: “The recent correction was expected, what we didn’t anticipate was its severity. We thought the markets would fall three to four per cent, but they fared much worse than expected.”
Dubai plunged 10.2 per cent in March, while for Abu Dhabi this figure was 5.38 per cent.
Meanwhile, Tabreed was Dubai’s top performer, surging 8.59 per cent to Dh2.40, although analysts say there was no particular reason for this sudden rise.
“Tabreed is one of the institutions’ favoured stocks,” said Khalek.
“It has a sound business model and most investors are very bullish on its future.”Aramex continued its slide, falling 1.11 per cent to Dh2.67. It declined by 16 per cent in March.
A Welcome Relief But Market Still Sluggish
While Dubai’s rebound yesterday was no doubt a relief for investors, the market remains in the doldrums and has suffered an awful March.
Analysts expect it to fall back again later this week, with it sticking around the 5,300-point mark for the time being. “We will probably see more selling tomorrow and Thursday, but overall there won’t be too much going on,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager.
“The market could fall another 100 points. There is little momentum at present, but expect things to pick up in the second week of April.”
Other analysts are not so sure.
“Investors are still wary about what’s happening on global markets,” said Alaa El Din Moustafa, EFG-Hermes chief dealer. “When the market finally stabilises and ends its correction, we should see a very aggressive rally, but we have only April and May before the traditional summer slowdown, so things might not pick until September or beyond. It will depend on the overall global economic outlook.”
In the short term, Moustafa said investors remain reluctant to retain shares for more than two or three days amid fears of another sudden, savage downturn. “Nobody wants to hold anything for too long,” he added.
The imminent dividend payouts could provide the catalyst for a market recovery with most of this cash likely to be reinvested in equities, boosting liquidity and providing short-term investors with the volatility they crave.