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15 July 2024

Market downturn expected to continue

By Matt Smith
The UAE stock markets are expected to struggle on Sunday, with the recent minor downturn likely to last for the next two days at least.

Since beginning the year in storming fashion, both the Dubai and Abu Dhabi exchanges have fallen away, with analysts warning they are likely to continue to move in a limited downward direction until later this week.

“I think the week is going to start quietly, especially on the buying side,” said Sherif Abdul Khalek, dealing room manager of Al Futtaim HC Securities.

“Volumes are likely to be low [on Sunday], but the market should pick up by Monday or Tuesday.”

The Dubai Financial Market General Index (DFMGI) surged 4.4 per cent from the start of the year to January 6, before subsequently dropping 1.75 per cent, which means it is up 2.5 per cent for the year to date.

Meanwhile, the Abu Dhabi Securities Market (ADSM) has fared better, jumping 4.7 per cent between January 1 and Monday, only to decline 1.06 per cent in the following two sessions. This means it has gained 3.6 per cent so far this year.

Khalek said: “I wouldn’t expect the market to fall by more than 0.5 to one per cent. If we see more of a correction to say 5,750 points in Dubai or 4,550 in Abu Dhabi, then prices would be very attractive and institutions, both foreign and local, would enter the fray.”

Listed companies are on the brink of announcing their full-year results for 2007, so there is likely to be increased speculation as the week progresses.

There are high expectations for bumper corporate revenues, with most analysts saying they are anticipating profit to increase by 20 per cent or more.

But these increased earnings are already largely reflected in current stock prices. This means that investors hoping to see a sudden jump in prices may be disappointed, although brokers are bullish about the market’s prospects in the medium term. Khalek added: “Results will probably start coming out this week, which are usually preceded by rumours and high net worth investors are sure to receive some advance inside information.

“All this will lead to more money flowing into the market in the next few days.”

Analysts are tipping Abu Dhabi’s energy sector to be the centre of attention again this week, with more institutional money flowing into the likes of Aabar Petroleum and Dana Gas. The latter is expected to reach a new record high within the next three months. Dana Gas shares jumped 70 per cent over the past year, reaching Dh2.67 on Tuesday, before slipping back to Dh2.63.

Meanwhile, the Abu Dhabi National Energy Company has also been active recently. The firm, which is 75 per cent owned by the UAE Government with the remainder held in public shares, has surged 14 per cent since the turn of the year thanks to record oil prices. Analysts say it would make further significant gains if it allowed foreigners to own shares.

In Dubai, investors are predicted to focus on the real estate sector and related companies, such as those in the construction and mortgage industries.

Emaar and Union Properties are expected to benefit in particular, while Amlak Finance and Tamweel should also prosper.

Analysts have also highlighted Dubai Islamic Bank, which has been flat of late after touching a 52-week high of Dh11.45 in early November last year.