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ADX retreats on profit taking as bearish trend continues

By Mohamad Al Kady
The Abu Dhabi Securities Exchange (ADX) continued its bearish trend yesterday with the index retreating 26.83 points, or 1.06 per cent, to close at 2,500.58.

The index has been fluctuating in a thin channel between 2,300 and 2,600 points for a considerable time and there is a lack of impetus to change this sideways trading pattern. Turnover was low with 44.3 million shares with a total value of Dh113.4 million changing hands.

Sorouh and Aldar dominated trading as both stocks faced strong profit-taking pressures after rallying last week. Aldar advanced sharply to Dh4.46 but profit-booking dragged the stock down to close at Dh4.17, a decline of 3.15 per cent.

Pressure on Sorouh was higher and it lost 8.03 per cent to close at Dh3.70. However analysts said the selling pressure came from individual investors while institutions continued to increase their holdings in the real estate and banking sectors.

Observers expected the real estate and telecommunications sectors to play a major role in supporting the index.

Ahmed Al Rawi, Operations Manager at Dubai Financial Brokerage, said increasing speculative movements in the real estate and banking sectors had created fluctuations in the market.

"We have seen several stocks close at their limits up and then at their limits down within a few sessions," he said. "This is creating high volatility in the market due to the lack of liquidity and confidence among investors. Investors are focusing on speculation rather than long-term investment because there is deep concern about listed companies. They prefer to trade on quick turnover, sometimes recycling the same liquidity several times during the same session.

"This trend is creating strong fluctuations in the index within the same session. Institutions have also contributed to this trend as they are behaving in the same way as individual investors. Institutions are now entering the markets for the short-term and a quick turnover, not for long-term investment. This has increased speculation and institutions should change their investment behaviour to help stabilise the market."

Al Rawi said he expected to see some corrective bounces during the next few sessions even though the long-term trend in the market remained bearish.

ADX endorses sorouh

Abu Dhabi Securities Exchange has issued a circular endorsing the reduction in foreign ownership of Sorouh Properties from 20 per cent to 15 per cent starting yesterday.

The ADX authority said its announcement came after Sorouh's board of directors decided to reduce the level of shareholdings allocated for foreign investment to 15 per cent.

The ADX said foreign ownership in Sorouh reached 14.55 per cent yesterday and stressed that brokers and investors should avoid any violation of the decision of Sorouh board of directors.

Sorouh decided to reduce limits of foreign ownership on allegations that "hot money" played a major role in deteriorating the stock prices, so the company decided to narrow the ability of foreign investors in buying and selling the stock.