Bullish analysts predict imminent rise
Analysts continue to remain bullish about an imminent rise in the market, disregarding the on-going selling pressures at moderate levels and the lack of catalysts that may reverse the trend.
The DFM index went down for the sixth consecutive session yesterday and lost 33.77 points, or 1.98 per cent, to close at 1673.60 points. The market is considered oversold and there are high opportunities for an upward bounce in the near future, but fears of renewed downturn movements are high due to several local and global factors.
Analysts said worries among investors about the 2009 results of listed companies have increased, with rumours that earnings may be worse than estimated, especially in the banking sector. Also, there are worries that global markets may face a correction within the coming few weeks and this may affect the sentiment in local markets and fuel downward movements.
"Selling pressures have remained at the same levels while there are no buyers," said Ahmed Tabbo, Financial Analyst at Darahem Brokerage. "There are high speculations on the DFM and all participants have turned to speculative strategies. Even local and foreign institutional investors, who are supposed to hold the DFM index, have turned to quick movements.
"Despite there being no signals of a reversal in the market, we expect a bounce today or tomorrow. This may hold the market for a short period but the downturn is expected to remain for the next few sessions due to the lack of catalysts. Listed companies have not disclosed their fourth-quarter results and full-year financial statements. These announcements in the coming weeks will be the main catalysts in the market."
Wadha Al Taha, a senior market analyst, said that the DFM was moving in a narrow range amid weak sentiment during the past few sessions.
"The market was giving positive indicators during the first week of January but the sentiment reversed mainly due to the lack of disclosures about the deal between Arabtec and Aabar. Unfortunately, the current movements in the DFM index show the result of that lack of disclosure.
"The DFM index has come close to its critical support area of 1650 points. The market needs to maintain this level in the short-term and consolidate around it to change its direction," Al Taha said.
Tabbo said the level of 1650 points should play an important role in holding the market to rebound. Emaar and Arabtec remained the main movers in the market yesterday and both stocks went down, dragging the rest of the active stocks into the negative area. Emaar shed 3.69 per cent to Dh3.39, while Arabtec dropped by 3.32 per cent to Dh2.33.
Turnover remained at low levels, as 147.3 million shares worth Dh253.3 million changed hands. Emaar and Arabtec dominated around 55 per cent of the total values.
"Despite the current drop in the turnover, we expect it to improve this year compared to 2009 levels. Detailed market data shows that the average daily trade values in the four years from 2005 to 2008 have reached Dh2.05 billion. Average daily values dropped by 50 per cent in 2009 but we expect an increase of 25 per cent this year," Al Taha said.
"Emaar and Arabtec will continue to lead movements in the DFM during the coming months. During the fourth quarter of 2009, both stocks were leading the movements in the market and they will continue to lead the trend. Any news, rumours or disclosures from both companies will lead to strong reactions from the market, as investors are focusing on both stocks," he said.
Tabbo attributed the drop in the turnover to the lack of incentives in the DFM at the current stage.
The disclosure period, at 45 days, is too long and the Securities and Commodities Authority should amend it to below 30 days, said Wadha Al Taha. "This long period is opening the way for rumours and high speculations.
"Due to the current negative sentiment, the rumours and expectations are pointing towards negative results of companies and this is deepening worries and uncertainties among investors," he said.
He said investors were taking a "wait and see" strategy to get a better outlook about the performances of listed companies.
"The SCA need to move and push companies to disclose their results early to help stabilise the markets.
"Due to the current market sentiment, it seems that these results will not be satisfactory for investors and the SCA has the power to ask listed companies for detailed information. There are worries among investors about external auditors' reports and the SCA can press on companies to give more details about their financial positions," he said.