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06 December 2023

DFM advances amid buying of select stocks

By Mohamad Al Kady

Dubai's bourse reversed its intraday trend yesterday to end the session up 10.25 points, or 0.69 per cent, to close at 1,488.64.

The Dubai Financial Market index opened up but quickly turned downwards and continued to fall, losing around two per cent on very low turnover amid calm trading.

However, the index changed direction in the last hour and gained more than 30 points amid increasing turnover and active trading until the end of the session.

The day started with strong selling pressure on Air Arabia, which led to the decline in the index. The stock advanced sharply early on to hit Dh1.01, adding more than 10 per cent. But the trend later changed and the price continued falling, limiting gains to 3.26 per cent as the stock closed at Dh0.95.

During the last hour, Arabtec stock saw heavy buying. The trend came after the stock faced selling pressure from the beginning of the session which dragged it down to Dh1.24, but later it advanced sharply to Dh1.32, adding 2.32 per cent.

The last hour witnessed heavy buying of Emaar stock, which added 1.63 per cent to close at Dh 1.87. There were high ask bids by the end of the session which reached more than two million stocks in one deal, indicating that some institutional investors were accumulating the stock. And there was active trading in DFM and DIC stocks.

However, the total turnover dropped significantly as 272.3 million shares changed hands at a total value of Dh290.8 million. Air Arabia led the active players, accounting for around 46 per cent of the total trade volume, while Arabtec, Emaar and DFM together accounted for 35 per cent of turnover.

"Yesterday's session was a total opposite of Sunday's session," said Kefah Al Maharmah, General Manager of Aldar Shares and Bonds. "The market started with a downturn at very low trading and turnover. There was selling pressures on selected stocks, especially Air Arabia, during the first three hours of the session. However, the trend reversed by the end, with active trading in some stocks including Emaar and Arabtec.

"Emaar stock is still and will continue to be the main player in the market during the next few sessions. Investors are waiting for Emaar's meeting to decide about the distribution of dividends. This situation has dominated sentiment in the market during the last few sessions and will continue to control investors' movements in the near future."

Al Maharmah predicted that the index would continue to face limited fluctuations during the next few sessions with trading remaining calm unless major news emerged that could change the behaviour of the market.

Fadi Al Saeed, Head of Mena Equities at ING Investment, said the current changes and fluctuations in the index arose from differences in behaviour between individual and institutional investors.

"When Emaar announced results that showed a sharp decline in the fourth quarter there was negative sentiment among individual investors who rushed to sell the stock and Emaar lost eight per cent on Sunday.

"However, institutions and major investors were buying the stock at low prices because they could analyse Emaar's financials in the right way. Most of the losses in the fourth quarter will not be repeated this year and the company still has strong financials.

"Yesterday the trend reversed and individual investors were buying while institutions were selling. But this is not a trend among institutions because they were benefiting from the quick appreciation in the stock and they took profit booking movements in the short-term."

Al Saeed highlighted the active trading in Air Arabia stock during the session, stressing that the company had strong results and fundamentals that attracted more investors.

DFM index to enter upward trend

The DFM index is likely to enter an upward trend in the short term after selling pressure reached minimal levels and some stocks performed strongly, according to Fadi Al Saeed, Head of Mena Equities at ING Investment.

He said he expected the index would rally to 1,650 points during the next few sessions, with some fluctuations. However, he stressed the need to increase turnover during the expected bounce. "This year may not be a good one for the DFM index and we do not expect major rallies."

He said, "However, we expect strong rallies in selected stocks which have strong fundamentals and have reported lower losses in their results.

"Some companies will rally because their businesses are proceeding as usual during the global crisis. The pressure will focus on listed companies which have taken a the major hit in the crisis."

He said the prices of stocks would change to reflect expectations of their future performance and would become more realistic. "Investors should focus on positive news from listed companies or regarding government moves and the situation in the economy. Also any recovery in the global economy will have a strong impact on local markets."

Al Saeed said he did not expect the DFM to face any major selling pressure in the near future because the market and listed stocks were already oversold.

"We expect buying of selected stocks to continue," he said.