Bears rule as DFM falls for sixth session out of seven

Julian Bruce of EFG-Hermes

The bears are winning as the Dubai Financial Market fell for the sixth session out of seven.

Optimists had hoped the worst was over following late buying on Sunday and this outlook seemed justified when the market closed in the green the day after, but these hopes have been dashed by the latest losses.

The DFM's General Index fell 0.55 per cent to 5,619 points, its lowest close since April 17. Moribund trading was again to blame for the market's limp performance, with turnover falling below Dh600 million for the first time in more than a month. This translated into just 118 million shares changing hands, which is barely a tenth of May's best session.

"At the moment the market is desperately seeking a catalyst for an upward movement," said Julian Bruce, EFG-Hermes director of institutional equity sales. "We were hoping to see more foreign money coming in, and although this has happened it's been in very small amounts."

Union Properties was the most active stock and it climbed 2.97 per cent to Dh4.85, while second and third placed Dubai Investments and Deyaar both declined.

The former was worst hit, losing 2.4 per cent, while the latter lost 0.88 per cent as an ongoing corruption probe saps investor confidence. Emaar was the most significant loser, however, with the market heavyweight retreating 1.31 per cent to Dh11.30, which, like the overall market, is its worst close since April 17.

The latest declines come as the DFM opened its two-day London road show yesterday. Last year's event saw a spike in trading immediately prior and after the showcase, but this has not happened this time around amid depressed investor sentiment.

Bruce said: "Foreign investors seem to be waiting on the sidelines because they know there are no real positive market drivers, while local investors are still concerned over the new rules regarding margin trading. Consequently, the market is drifting downwards."

Aman jumped 7.32 per cent to claim top spot on the Dubai gainers' chart, which was dominated by insurance companies.

Arab Insurance and Dubai Insurance surged 4.95 and 4.97 per cent, while Ascana was up 2.06 per cent.

Aramex and Arabtec were other notable losers. The former failed to advance despite its chief executive claiming annual revenues would reach Dh2.23 billion in 2008, which would be a 25 per cent hike on the year before. Earlier this month, Aramex received approval from the UAE regulator to increase its share capital from Dh1.1bn to Dh1.2bn. It fell 1.2 per cent yesterday, while Arabtec lost 0.92 per cent.

Shuaa Capital fell 0.61 per cent despite Moody's awarding the firm a Baa2 rating, which Shuaa claims put it in the top 20 global securities firms.


Long-term outlook still positive

Julian Bruce, EFG-Hermes director of institutional equity sales, has reiterated his positive outlook for the UAE markets in the longer term.

He said: "There isn't any downside fundamentally and the market is looking reasonably attractive, but the foreign funds are aware of the downward pressure from locals and so are waiting to pick up stocks at lower prices."

While the UAE markets suffered during a global stock sell off earlier this year, they escaped lightly when compared to other many other emerging and developed markets. And where there is crisis, there is also opportunity. So institutional investors have been able to pick up stocks at bargain prices in many different markets across the world, leaving the UAE to drift from view.

"UAE stocks are reasonably priced, but they're not quite the bargain they once were, so we don't see buyers accumulating that aggressively," said Bruce. "This means that when a local institution wants to see a large tranche of shares there aren't many strong bids and so the market gets pushed down."

Bruce also highlighted fears that investors could be facing three months of inactivity, with the traditional summer slowdown in July and August swiftly followed by the start of Ramadan in the first week of September. "Everyone seems to be reluctant to do anything before this period is over," Bruce added.

This could spell bad news for UAE investors if the markets follow the pattern of last summer, when the Dubai bourse fell 3.5 per cent in July and August 2007, while the Abu Dhabi index fared slightly better, losing three per cent over the same period.