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13 April 2024

Expected correction to see stock markets opening cautiously

By Matt Smith




Investors will be hoping the UAE stock markets return to winning ways on Sunday following a dismal end to last week.

The Dubai Financial Market has lost more than 220 points over the past two sessions, wiping out earlier gains and leaving it down 0.36 per cent for the week and 3.68 per cent below Tuesday’s year-best of 6,292 points. The decline on the Abu Dhabi Securities Market has been less severe, with the capital’s index dropping around 90 points since posting a 52-week high on Tuesday. This limited downturn means the ADSM gained 2.7 per cent overall last week.

“From the beginning of the week I was expecting a correction and predicted it would not be more than five per cent, so I think Dubai will begin cautiously today,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager.

“It will probably decline slightly before picking up again either today or later this week. The market is searching for the bottom and many of the stocks on both Dubai and Abu Dubai exchanges are resting on support levels.”

All eyes will be on the DFM’s own shares after they suffered their largest one-day decline on Thursday, plunging 9.06 per cent to Dh5.82.

“The DFM is a very volatile stock and foreigners have been heavy sellers, but there’s a lot of confidence in it,” said Khalek. “The sellers were mostly investors who had bought at around Dh2.50, plus some others who cashed in their IPO allocation. Foreigners started the selling and locals followed suit.”

Institutions who have cashed in positions of late to cover losses elsewhere may see the market downturn as an opportunity to buy on the cheap, so the market should be able to rebound fairly swiftly, analysts said.

Khalek said: “Fund managers don’t just operate in one country, they are present in multiple markets so when exchanges are falling the world over, as has been the case during the past week, it’s natural for them to book some profits.”

Abu Dhabi has stumbled amid investor concern that many of the capital’s energy shares may be overvalued following their recent rally, Wadah Al Taha, Emaar Financial Services head of research, told Dow Jones.

“It might be true of certain stocks, particularly Aabar, but not for Dana Gas,” said Khalek. “Energy stocks may be overpriced in terms of fair value, but this is true in markets across the world and the high oil price means it’s not a major worry.”

Al Taha predicts Aabar could top Dh5 after its full-year results are announced. It ended the week on Dh4.79, after having jumped 28 per cent since the turn of the year.

Foreigners buy 36% shares

The Dubai Financial Market said foreign investors bought 36.3 per cent of the total value of shares traded between January 13 and 17.

Foreign investors bought Dh5.4 billion of shares, the exchange said in a statement. The value of shares sold by foreigners in the period stood at Dh5.8bn, or 38.8 per cent of the stocks sold. Institutional investors bought shares valued at Dh4.4bn, or 29.6 per cent of the total value of stocks traded, and sold Dh5.2bn of shares, according to the bourse.