DFM closes in red for the third time this week

When a one fils increase earns a stock second place on the daily gainers chart, it's surely a sign the market is in trouble.

And that's what happened on the Dubai Financial Market yesterday, with Gulf Navigation rising 0.55 per cent to Dh1.81 to be the second best performer on the General Index.

Dubai's turnover fell by third from Tuesday to slump to the lowest for two weeks, with just Dh768 million of shares changing hands. Overall, the Dubai bourse was little changed, losing 0.06 per cent to 5,723 points, although this is the third time this week it has closed in the red.

"The low volumes can be taken as a relatively positive sign because if there were huge volumes on a falling market then we would expect a sharper and more sustained decline," said Julian Bruce, EFG-Hermes director of institutional equity sales.

"We started the week with concerns over the fall in the US markets, which prompted local, rather foreign, investors to take profits.

"The 5,850-mark is becoming a psychological barrier for a lot of people. The market has touched this level, but failed to break through and so investors are worried it will continue to drift backwards."

Emirates NBD helped prop up the index, rising 2.1 per cent to Dh12.10, but Emaar lost further ground, slipping 0.43 per cent to Dh11.35. The latter was the fourth most active stock on the DFM, while its mortgage subsidiary Amlak Finance was fifth to make the duo's combined volume total 23 million shares. Amlak also fell dropping 1.2 per cent to Dh4.90, its lowest close this month.

"There's an ongoing theme of local investors taking profits, so even though there's significant inflow from foreign funds it's not enough to overcome the 5,850-point hurdle," said Bruce. "Emirates NBD was the only highlight in Dubai. There's no need to chase stocks and so people are waiting for stocks to come to them. Overall, this is not a panic move. The market is off a little, but many investors are quietly accumulating positions."

The DFM Company was top trader as investors sold up amid weakening sentiment. This pushed it down 1.58 per cent to Dh5.60, its worst finish since mid-April.

Dubai Investments slumped after five days of gains, although this profit taking was mild to push it down 1.63 per cent to Dh4.22 and so it remains up 13.4 per cent in June.

Bruce said: "In the short term, I don't see any change in the trend of either market. There is still a bit of a negativity in the global picture and the UAE can't really do anything to differentiate itself."

One hope could be that the poor performance of the Dubai bourse, which is down 3.5 per cent this year, could attract bargain-hunters from home and abroad.

"The Qatar index has been well and needs a breather, so this might see regional investors switch cash to the UAE," said Bruce.

Erosion of confidence

Negative global sentiment is eroding local confidence in the UAE market, according to Julian Bruce,

EFG-Hermes director of institutional equity sales.

"When China falls one per cent no one takes any notice, but when it drops eight per cent in one session, as it did earlier this week, it's not surprising to see investors take some money off the table," said Bruce.

"When the UAE exchanges enjoyed a storming rally at the end of last year, there was talk of emerging markets decoupling from their global counterparts, but this was nonsense, especially with foreign players becoming more active locally."

Meanwhile, DP World fell for the second session running yesterday, slipping 1.06 per cent to $0.93.

It has not closed in the green since May 30 and is now at an eight week low. Meanwhile, Depa added 0.65 per cent to finish on $1.55, its initial public offering price.