Telecoms and banking stocks helped the Abu Dhabi Securities Exchange end a four- session losing streak, although analysts warn the latter sector may retreat again today.
As forecast by this column yesterday, the ADX made minor gains, rising 1.28 per cent to 2,346 points, with Sunday's late rally belatedly taken into account because of the market's use of closing average prices.
Market leader etisalat provided the foundation for this surge, climbing 2.4 per cent to Dh10.85 following widely publicised comments by Shuaa Capital analysts that telecoms were a good bet for investors in the current downturn.
Most banks also prospered, with Abu Dhabi Commercial Bank and Union National Bank both jumping more than six per cent, while National Bank of Abu Dhabi and First Gulf Bank added 1.65 and 0.89 per cent.
However, these gains are likely to be temporary, according to Wadah Al Taha, a financial analyst. "Banks made large falls on Sunday and so yesterday was only a partial rebound," said Taha.
He believes bank stocks are likely to decline further as sector profits come under pressure. "Banks increased their real estate and stock portfolios and these are taking a huge hit in their valuations, while interest revenue will be negatively affected by the liquidity crunch, which is reducing loan growth," said Taha.
"The lack of liquidity will affect the general operations of banks and so there is a possibility of a dramatic drop in profits in the first quarter."
This means banks should preserve cash to act as a cushion against any unforeseen factors that could further impact their ability to operate, Taha warns.
Meanwhile, yesterday proved a mixed session for the capital's property developers. Sorouh Real Estate recouped Sunday's losses with a 5.67 per cent rise, but Aldar Properties slunk to another two-year low following a 2.52 per cent drop to Dh3.09.
Gainers narrowly eclipsed losers 15:13, which suggests the ADX may fall again today, especially if trading continues to be so moribund.
Turnover slipped to a six session low of Dh119 million, with Sunday's bumper trading proving to be an anomaly.
Arkan, which claimed trading worth Dh299m on Sunday fell to Dh2.7m yesterday, supporting analysts' claims that this sudden surge in trading was the work of a few high net worth investors trying to manipulate the stock.
The building materials supplier fell 3.7 per cent to Dh6.24.
DP World drops 3.33%
DP World fell to a new record low of $0.29 as early buying gave way to profit taking on a quiet session on the Nasdaq Dubai.
The ports operator started strongly after HSBC upped its recommendation from neutral to overweight, but these gains were subsequently squandered to send DP world down 3.33 per cent as 4.9 million shares changed hands.
HSBC slashed its price target for the stock from $1 to $0.50.
Meanwhile, the two other active stocks on the Nasdaq Dubai also struggled. The rarely traded Boulder Steel dropped 16.7 per cent to $0.05 and Depa fell 5.56 per cent to $0.51 after seeing 350,000 shares offloaded.