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29 February 2024

DFM, ADX in stable to positive range

Regional markets are not expected to dance to the tune of global markets this week. (EB FILE)

By Sreenivasa Rao Dasari

The trading outlook for Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) for the next week is positive with the increasing participation of local investors.

Since the global cues have already been discounted by the stock markets, the adverse conditions on international markets may not drive the regional bourses down, say experts.

"In an overall view, DFM and ADX are to record trading pattern in the range of stable to positive," Wadah Al Taha, senior market analyst, told Emirates Business.

DFM lost 42.45 points during the week from March 1 to 5 to close at 1516.53 against the previous week close of 1558.98 points. Foreign investors bought Dh968.1 million worth of shares during the week and sold about Dh1.048 billion of shares.

With the Dow and S&P trading at 12-year lows and Nasdaq sliding to six-year lows, market watchers are chary of the future direction of the markets. However, chances are high regional markets may not dance to the tune of global markets.

Vyas Jayabhanu, head of Al Dhafra Financial Services, said: "The outlook for next week should be positive because global factors have already been discounted by the local markets. Unless Dow breaks below the critical level, there wouldn't be negative impact on the regional markets."

"There is a definite shift in thinking happening where fear of holding positions is giving way to thinking that bad news is priced in and downside is limited at these levels. These stocks are like coiled springs at current levels, the harder you push down on them, the faster they whip back," said Mathew Wakeman, Managing Director, cash and equity linked trading, EFG Hermes.

The value of shares bought by institutional investors on DFM reached Dh406.2m, which accounted for 16 per cent of the total traded value, while the value of shares sold stood at Dh473.9m. The value of shares sold by institutional investors during the week at Dh473.9m accounted for 18.6 per cent of the total value of the stock traded on DFM. Net institutional investment on the market touched Dh67.8m this week. During the week March 1 to 5, banks' net investment on DFM stood at Dh12.34m and institutions at Dh67.79m. UAE nationals' net investment was recorded at Dh81.05m during the week.

Going by the increasing activity, volatility on both the bourses is also high. ADX closed the week at 2417.68 points with volatility hovering at 27.81 per cent as against the 37.53 per cent on DFM. Retail investors are active in both markets, particularly in Dubai.

"Assuming that the market will not receive any negative news, I foresee positive trading pattern on DFM. There is volatility on both the exchanges. The correlation between DFM and ADX is very low. During the past 10 days, it had been positive, but only the lower trading volume. Heavy profit booking is seen. ADX has lower volatility compared to DFM. The ADX index is the only one among the GCC that has been moving in positive zone. A slow recovery is taking place on both the bourses. Abu Dhabi is expected to touch 2510 and DFM may break 1560. This quarter may close lower or closer to the fourth quarter of 2008," said Al Taha.

"Stocks like Air Arabia and Ajman Bank have turned very attractive at the current levels," said Jayabhanu.

Some profit taking into the long weekend weighed on the markets in the last hour. Another $200m (Dh734m) turnover session on DFM shows that the buyers are still there and mopping up any weakness.

"Volume in Abu Dhabi remains low at just $30m and activity is concentrated on the large caps. Consolidating recent gains and holding the 1500 index level in Dubai sets us up for an upward move next week and a possible re-test of the 1660 resistance level. We will hear the restructuring plan for Amlak and Tamweel on Tuesday, according to the media. The two stocks have not traded since last November," Wakeman said.

"The expected news on Amlak and Tamweel will impact the trading pattern. The suspension of trading has been too long," said Al Taha.

Current market activity is predominantly retail.

"Drake and Scull, the IPO that was 101 times oversubscribed last July, will start trading on March 16. I would expect pressure on the stock as comparative valuations are very different now," said Wakeman.