Dubai index rises to highest close since March 19

(DENNIS B MALLARI)   

The Dubai Financial Market increased for the fifth day running on Sunday, but analysts warn the April upturn could be illusory.

The DFM’s General Index put in a solid performance to increase by 0.92 per cent to 5,516 points, its highest close since March 19.

Volumes were average for the month, with 320 million shares worth a combined Dh1.37 billion changing hands.

However, much of this trading was focused on stocks fast approaching their respective record dates for dividend payouts and if these stocks were removed from the market totals, trading would actually be fairly stale.

“The market has stablised, which is good, but volumes remain a major concern,” said Ayman El Saheb, Darahem Financial Brokerage director of operations.

“I don’t want to sound pessimistic, but we may not yet be out of danger with investors looking to book profits in the near future.

“Certain shares such as Tamweel, Dubai Investments and Rak Properties are gaining momentum as investors target these stock ahead of dividend payouts, but the heavyweights are not seeing much movement. These speculators don’t care about the actual dividend for themselves, but are buying low and selling high to those investors who do.”

Apart from stocks seeing dividend-based speculation, the spreads on most companies have narrowed. For example, Air Arabia and Deyaar traded in a three and four fils range respectively on Sunday, while Emaar and the DFM’s own stock both moved in a range of less than 2.1 per cent.

During the March downturn, many analysts pinned their hopes on the first quarter results providing the momentum the exchanges craved, but investors could be mistaken in believing this will provide the long-predicted market boost, Saheb warned.

“Investors need to see money coming into the market and staying there for more than three or four trading sessions,” said Saheb.

“Whenever investors see a company start going up they are twice as cautious as they used to be. They’re worried that if they go in, they will be buying from the very people who bought previously in order to push the price up.”

Julian Bruce, director of institutional equity sales at EFG-Hermes, is more optimistic, heralding the return of both both local and foreign institutions. “The net inflow from foreigners last week was a positive indication, which shows money is returning ahead of the first quarter results,” said Bruce.

“Regional investors will start to take money out of the markets that have been doing well, such as Egypt and Kuwait, to make significant inflows into UAE stocks. This should help the DFM and ADSM outperform their regional rivals over the next month.”

Bruce’s upbeat outlook is partly based on excellent results from Amlak Finance, which on Sunday announced a five-fold increase in its first quarter profits to Dh126 million.

“There are certain factors to be considered, but these results were better than expected,” said Bruce. “More news like this will prompt the return of Western institutional money. If the market seems to be performing well, then some of the local institutions that were selling into this strength will buy back into the market, which would significantly increase volumes.”

Bruce highlighted Amlak, Tamweel, Tabreed and Union Properties as stocks likely to enjoy rising share prices amid increasing demand from foreign funds.

ADSM extends gains

The Abu Dhabi Securities Market extended its winning streak to four sessions on Sunday with a modest 0.29 per cent rise to 4,773 points, thanks to turnover of almost Dh1bn.

Unsurprisingly, real estate dominated trading in the capital, with this sector accounting for half of the ADSM’s turnover.

Rak Properties was the most in demand stock as it surged 5.36 per cent to Dh2.43. It was twice within sight of reaching the 10 per cent maximum gain on Sunday, before profit taking pulled it down, which is an indication that speculators were driving trading. The developer has climbed 16 per cent since March 31. Sorouh and Aldar Properties enjoyed mixed fortunes on Sunday.