ADX may be bottoming in the short-to-medium term

The Abu Dhabi Securities Exchange (ADX) has started to give strong indications of finding its bottom in the short-to-medium term after its index rallied for eight consecutive sessions.

The ADX index added 71.67 points, or 3.02 per cent, yesterday and closed at 2448.15 points.

The ADX has stood firm and steady during the past few weeks and it is nearing its major resistance level at 2500 points. The upward trend in the ADX was proceeding under low turnover in the market. Around 77.5 million shares changed hands yesterday at a total value of Dh168.2 million.

However, analysts attributed the low turnover during the upward trend to cautious movements by investors, both individuals and institutional. "Investors in the ADX are taking very cautious movements because the trend is still not very clear. However, the ADX has shown firm and steady movements in the last five weeks. Also, local individual and institutional investors are supporting the market," said Hesham Bakry, Institutional Sales Manager at Al Futtaim Securities.

"We expect the ADX will continue its steady rally during the next few sessions as the outlook of most listed companies is positive. Etisalat announced strong dividends in its 2008 results and the stock has more room for upward movements in the short term. Energy stocks, especially Dana and Taqa, are bullish. Dana announced three natural gas discoveries in one year and this is giving strong fundamentals for the company. Waha also is backed by strong contracts with the Abu Dhabi Government."

Bakry said the outlook of listed companies in the ADX would strengthen the market in the medium term. "We expect the current steady upward trend to continue until the results of the first quarter this year, which will be decisive in confirming the bottoming in the market. After the first quarter, we expect a strong rally in the ADX."

He also recommended accumulating stocks in the ADX for long-term investments.

Humam Al Shamaa, economic consultant at Al Fajr Securities, agreed that the ADX has been giving strong indications for bottoming during the past few weeks.

"Despite cautious movements by investors in the market, there are strong indicators for bottoming. The low turnover reflects a low selling appetite among investors. Etisalat rallied during the last three sessions. Historically, etisalat's stock has always led any rebound in the market and the stock looks bullish."

Al Shamaa also expected the risk appetite among investors to start increasing very soon, which might create a rally in the ADX.


VOLATILITY REMAINS IN DUBAI BOURSE

Active stocks in the Dubai Financial Market (DFM) closed almost flat and this trend reflected on the index, which also ended nearly flat, losing 10.31 points, or 0.66 per cent, to 1548.67 points.

The market opened down at 1530 points under some selling pressures, but the trend changed immediately to buying and the index rallied to its resistance area of 1560 points. The buying focused on select active stocks, especially DFM, Arabtec and Emaar.

"High volatility remains in the DFM due to the speculative investment pattern among investors. The past two weeks have witnessed high fluctuations in the index and we expect this pattern to continue. The index may rally five-six per cent in one day and retreat two-three per cent the next," said Bakry.

DFM's stock attracted buyers after it hit its support level at Dh1.15 and continued buying took the stock higher to the Dh1.31 level, but it later retreated to close flat at Dh1.24. DFM's stock was the leading active stock by both trade volume and value.

Emaar's stock also ended flat at Dh2.06 after it faced selling pressures at the beginning of the session, which took it to its support level at Dh1.99. However, it staged a recovery throughout the session and regained all its losses by the end.

Arabtec's stock went down to Dh1.44, but later recovered and rallied to the Dh1.60 resistance levels. It closed at a bullish Dh1.55, up by 1.30 per cent.

The turnover was low throughout the session and picked up during the last hour of trading. Around 342.2 million shares changed hands at a total value of Dh423.7m, still below last month's average trade value, which reached Dh511m.

The DFM stock formed around 45 per cent of the total turnover, while DFM, Arabtec and Emaar stocks together represented more than 70 per cent.

Gulf Navigation attracted strong movements throughout the session after the company announced that it has received approval from the Emirates Securities and Commodities Authority to buy back 10 per cent of its shares numbering 165.5 million. There was strong buying on the stock since the beginning of the session and it closed at Dh0.57, adding 3.63 per cent.

Deyaar Development's stock faced strong selling pressures after the company decided not to distribute cash dividends or bonus shares for 2008. The DFM resumed trading on the stock after the company disclosed results of the meeting of its board of directors. The Deyaar stock lost 5.66 per cent and closed at Dh0.50.

Pressure on Deyaar and other real estate stocks also reflected renewed speculations that there will be new mergers in the sector very soon, despite most real estate companies ruling out any such move.

"Speculations of mergers among real estate companies created selling pressures on the stocks as investors were very cautious. Also, speculative movements were clear in the sharp fluctuations in the index," said Al Shamaa of Al Fajr Securities.

Follow Emirates 24|7 on Google News.