DFM bounces again amid weak turnover

The Dubai Financial Market (DFM) bounced up for the second time this week, thanks to a last minute rally in leading active stocks despite the turnover remaining at low levels.

The DFM index added 15.55 points, or 0.94 per cent, and closed at 1677.09 points, just above its intraday resistance level of 1670 points. The index fluctuated sharply and in a thin range between gains and losses throughout the session before Emaar and Arabtec rallied during the last few minutes of trading and pushed it higher.

The DFM continued to witness weak trading throughout the session, as trade volumes dropped to their lowest levels this week. Despite the index opening in the positive area, volumes were very low and trade values during the first hour reached about Dh30 million, with Emaar and Arabtec dominating around 70 per cent. The values in the rest of the stocks were very humble.

Later, some secondary-listed stocks, such as Kuwait-based Gulf Finance House, attracted good transactions. DFM, Aramex and Air Arabia stocks also turned active during the middle of the session.

The total turnover remained low, with 131 million shares worth Dh210.1m changing hands during the session. Emaar and Arabtec dominated about 25 per cent of the turnover. Both stocks remained above Tuesday's closing throughout the session but were moving in a thin range. By the end of the session Emaar had added 1.9 per cent to close at Dh3.38 while Arabtec added 2.55 per cent for a Dh2.41 close. Both stocks were trading at their critical support areas and their rally was giving some positive indicators despite the remaining weakness in the market.

"The DFM index was able to close above its intraday resistance of 1670 points and this is good for the time being," said Ehab Rashad, Trading Manager at Direct Broker for Financial Services. "The low turnover is adding more weakness in the market and it is projected to continue its ups and downs in a narrow range during the next few sessions until there are strong movers. "Despite the market bouncing up, this move came at the end of the session and reflects weakness in the market," he added.

Rashad also said foreign investors might start accumulating stocks at the current stage. "We noticed a minor shift in trading patterns. Local investors turned sellers while other Arab investors were the leading buyers and foreign investors came second in the buying trend. The buyers are targeting selected stocks now. Buying is still weak and we need a strong trend to see good movements in the DFM index."

Abdul Hakim Jamil, Financial Analyst at Al Brooge Securities, said the rebound in leading active stocks was expected as they were trading near important supports and were closing previous gaps in prices.

"Emaar had a gap in the range of Dh3.25/Dh3.40 and the stock was closing it. We were expecting a buying trend when Emaar tested the Dh3.30 level and this happened when the stock went down to Dh3.31 during intraday trading.

"The same story took place in Arabtec, as the stock closed its previous gaps and witnessed buying interest from its lows. The market is weak at the current stage but there is a high potential for a strong rally in two months, which may take the DFM index up to 2150 points. The rally will depend on Emaar's movement as it needs to rally above Dh3.45 in the near term," Jamil said.

He cited a new activity in select stocks, which are predicted to distribute good dividends. "Investors have started to accumulate on some stocks with expectations of good earnings, such as Aramex and du. This movement is mainly speculative because investors predict good dividends from these companies," Jamil said. "However, this buying trend is also weak and there are no strong accumulations that can change the trend in the DFM. The current interest in these stocks is not sustainable and after announcing 2009 earnings the market will return to focus on active stocks again."


Weak sentiment reflects confusion

The present weak sentiment in the DFM reflects deep confusion among investors amid increasing rumours and leaks of information, according to Abdul Hakim Jamil.

He said the declining turnover came due to uncertainty among investors who were neither selling nor buying.

"Investors who hold positions in the DFM are not selling at the current low prices, anticipating that the market will rebound and they will be able to protect their investments. Those with cash positions remained outside the market, waiting for more information about earnings and the performance of companies before they re-enter."

Jamil said speculators are inactive in the DFM's current trend because most stocks are trading in a very thin gap of 2-3 fils, which hardly provides any incentives for speculators and daily traders. "Also, the DFM is witnessing a spate of rumours and leaks of information about different companies. This has added confusion among investors and they cannot take decisions on their investments."

 

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