Dubai back in red but Abu Dhabi rebounds in style

Savage late selling forced the Dubai bourse back into the red on Wednesday, but Abu Dhabi shrugged off its recent woes to make its largest one-day gain for six weeks.

The Dubai Financial Market’s decline took many analysts by surprise, with most expecting it to rally following the US Federal Reserve’s 0.75 per cent interest rate cut on Tuesday.

“The Dubai slump was disappointing after it climbed 90 points in the morning, but the long weekend means that US markets will trade for three more sessions before the UAE exchanges open again,” said Ayman El Saheb, Darahem Financial Brokerage director of operations. “So if you were an international fund manager, would you leave your money locked in the Gulf or cash in and use this to invest in American stocks, which have reacted very positively to the rate cut?”

Local investors were also nervous about what could happen on the international markets while the UAE exchanges are closed today and tomorrow, so played it safe by cashing in positions.

With Dubai sliding 0.7 per cent, it was left to the Abu Dhabi Securities Market to follow the script, as the capital’s index surged 2.15 per cent to 4,676 points, buoyed by gains in its real estate, energy and banking sectors.

“After four straight losses, Abu Dhabi was prime for a rebound, especially after the Fed cut, however illogical that actually is,” said a senior analyst who did not wish to be named.

“There has been a temporary positive reaction in America, which helped the ADSM, but neither domestic market has escaped its current trendless mood.

“For that to happen they need high volumes and at least three successive positive sessions.”

Aldar and Sorouh returned to form, leaping 4.48 and 1.93 per cent respectively, following another glowing report from HSBC predicting the capital’s residential prices will increase by almost half over the next two years. Sorouh was among Abu Dhabi’s most volatile stocks, trading in a 4.5 per cent range.

“The Aldar jump was unanticipated and there could be some profit-taking when the markets reopen on Sunday,” said Alok Nawani, Emaar Financial Services equity investment analyst.

The market big boys also prospered, with etisalat and National bank of Abu Dhabi both making near-two per cent gains. The losers were all small cap companies.

“The Abu Dhabi market is more stable than Dubai with less day traders and more players with a medium- to long-term perspective,” said Darahem’s Saheb.

The interest rate cut is likely to boost liquidity on the UAE markets according to Haissam Arabi, Shuaa Capital managing director of asset management.

“Relative to inflation the negative real interest rate is more than five per cent, which means people can earn more through dividends than through interest from bank deposits,” he told Bloomberg.

Air Arabia fell 1.51 per cent Dh1.95, following Emirates’ decision to launch a Dubai-based low cost carrier. “This wasn’t good news for Air Arabia’s stock, especially when it is already trading at a premium,” said Nawani.

EMMAR SELLING

Investors were left cursing after the Dubai Financial Market failed to build on Wednesday’s early promise.

The DFM looked set to build on Tuesday’s rise and was up 1.45 per cent in early trading, but heavy selling in Emaar led the index to a close of 5,578 points, down 0.7

per cent.

Emaar was highly volatile, trading in a four per cent range as it fell 0.87 per cent to Dh11.35 by the finish.

“To see Dubai decline after the big rate cut and a major rally on the North American markets was a surprise,” said Alok Nawani, Emaar Financial Services equity investment analyst.

“I can’t say why Dubai fell – perhaps some big players decided to take profits and the rest of the traders followed.”

Emaar claimed Dh349 million of the Dh1.34 billion of shares changing hands in Dubai on Wednesday, the market’s best turnover this week.

“It was obvious speculators were going to cash in before Emaar’s annual meeting. There are a lot of nervous investors out there – so once the property developer hit Dh11.80, the profit-taking started and dragged the  market down,” said an unnamed analyst.

Losers outnumbered gainers 18:7 as most of the market blue-chips toiled. Dubai Islamic Bank fell 1.8 per cent, while du declined by 1.64 per cent.

CONFIDENT OF RALLY ON SUNDAY

Analysts are confident the UAE markets will rally on Sunday, although any gains may only be temporary.

“Hopefully, Wednesday was only a temporary fall and the UAE markets will bounce back when they reopen on Sunday,” said Ayman El Saheb, Darahem Financial Brokerage director of operations.

“There won’t be any more excuses left – the long weekend will be over, the rate cut has boosted global equities and the local economy is booming.

“The people who sold at Wednesday’s peak will try to buy back at these lower prices and make a healthy profit.

“If the correction continues next week it shouldn’t be more than 200 points.”

Another senior analyst, who did not wish to be named, also cautioned against investors getting carried away by any Sunday surge.

“I doubt we will see a clear uptrend next week. The international markets will fall again and that will blight our exchanges, however silly that connection is,” he said.

“Local factors will balance out the negative global news, so any decline should be slight.”

Like many before him, he predicts the UAE markets will rally ahead of the first quarter results, while also highlighting likely major moves by the big investors.

“Funds will buy up the DFM stock at current prices, it’s too tempting not to,” he said.

“In Abu Dhabi, the real estate and banking sectors offer the most promise, with First Gulf Bank an excellent choice in particular.”