News
DFM continues over its critical support at 4,700
Turnover at the Dubai Financial Market (DFM) is expected to drop sharply to around Dh200 million every day during the first week of Ramadan, but the Dubai index is projected to remain over the support level of 4,700 points.
The market closed over this level for the fourth consecutive session yesterday despite the index losing 26.74 points, or 0.56 per cent, and reaching 4,763.06 points.
It is giving positive indicators for analysts by remaining over the support level of 4,700 points for a long time.
Turnover continued at moderate levels as trade volume reached 133.3 million shares at a total value of Dh723.8m. However, the market still needs more liquidity to increase the turnover to more than a billion dirhams to ensure that it is formulating a bottom.
The market gained around 40 points during intra-day trading, but the index reversed its direction in the last hour of trading as a result of sharp selling pressures, which analysts attributed to movements by firms to close credit of their customers before submitting their reports on the last day of the month.
Emaar Properties stock declined to Dh9.11, despite trying to hit its resistance level at Dh9.54. The real estate sector performed badly, due to the decline in both Emaar and Union Properties. However, the banking sector, led by ENBD, held the index from suffering a sharp decline. Khalid Darwish, assistant general manager of Rasmala Brokerage, said Emaar would continue its pressure on the DFM index because the stock has not given signals of consolidation so far.
"Emaar's stock is still in a downturn trend since it broke through the Dh10 level. The stock tried to hit the resistance of Dh9.54 but failed and then it continued in a slide.
"There are increasing expectations that the next support level will be around Dh8.50-8.60. This will create more pressure on the index," Darwish said.
"However, the market is still giving positive signals by continuing to close over it critical support levels of 4,600-4,700 points. The performance during most of the session was satisfactory until the last hour of trading when selling pressures increased sharply. These pressures are mainly due to movements by brokerage firms to cover the credit of their customers who are trading on the margin," he added.
Darwish said that the turnover in the DFM would decline during the first week of Ramadan and may reach around Dh200m.
"It is important that the index continues to hold over its support level during the decline in turnover. We expect the turnover will start to increase by the second week of Ramadan. This may help to consolidate the market and create a bottom. This needs increasing turnover to more than Dh1bn for at least three sessions," Darwish said.
"The liquidity is still poor in the market despite some new liquidity coming in. We expect local liquidity to increase by the second week of Ramadan. This will help compensate the selling pressure by foreign and institutional investors," he said.
Darwish added that foreign investors were depending on technical analyses rather than fundamental analyses in their investment decisions. "These selling pressures will continue as long as the market is giving negative indicators about its trend. Once the DFM reverses its trend, we expect foreign and institutional investors to return strong liquidity to the market."
Waleed Al Khateeb, manager of trading at Daman Securities, agreed that selling pressure at the end of the session played a major role in the decline of the index.
"It was clear that brokerage firms were pressing their customers to sell their holdings before submitting their monthly reports. Also, increasing speculations created new pressures on the index because selling Emaar at the current levels is illogical. The lack of confidence in the market is still prevailing among investors and this is exerting pressure on Emaar's stock," he said.
Al Khateeb also highlighted the role of the ENBD stock, which helped the index to regain 50 points and narrow its losses.
"The index surged at the beginning of the session after stocks in the banking sector, especially ENBD, gained sharply. But the index turned down by the end of the session due to pressure from the real estate sector," said Al Khateeb.
High volatility
Shiv Prakash, equity investment analyst at MAC Capital, sees high volatility in the DFM after it fell to the first expected supports of 4,742 and later recovered on select buying towards the intra-day second resistance of 4,840.
The DFM then witnessed profit booking as the market saw a good rise – from 4,660 towards the high of 4842 – in the last three sessions.
He said uncertainty prevailed and led to early profit booking, but the market is still above the previous day's lows and a rally towards 5,000 is expected in the near term.
"We can see a sideways movement in the short-term but if the 4,650-level if breached we will definitely witness the continuation of the downturn trend," he said. For Emaar's stock, Prakash said a close above Dh9.55 is a must for it to be bullish, otherwise it will head towards the previous lows of around Dh8.91.
The market closed over this level for the fourth consecutive session yesterday despite the index losing 26.74 points, or 0.56 per cent, and reaching 4,763.06 points.
It is giving positive indicators for analysts by remaining over the support level of 4,700 points for a long time.
Turnover continued at moderate levels as trade volume reached 133.3 million shares at a total value of Dh723.8m. However, the market still needs more liquidity to increase the turnover to more than a billion dirhams to ensure that it is formulating a bottom.
The market gained around 40 points during intra-day trading, but the index reversed its direction in the last hour of trading as a result of sharp selling pressures, which analysts attributed to movements by firms to close credit of their customers before submitting their reports on the last day of the month.
Emaar Properties stock declined to Dh9.11, despite trying to hit its resistance level at Dh9.54. The real estate sector performed badly, due to the decline in both Emaar and Union Properties. However, the banking sector, led by ENBD, held the index from suffering a sharp decline. Khalid Darwish, assistant general manager of Rasmala Brokerage, said Emaar would continue its pressure on the DFM index because the stock has not given signals of consolidation so far.
"Emaar's stock is still in a downturn trend since it broke through the Dh10 level. The stock tried to hit the resistance of Dh9.54 but failed and then it continued in a slide.
"There are increasing expectations that the next support level will be around Dh8.50-8.60. This will create more pressure on the index," Darwish said.
"However, the market is still giving positive signals by continuing to close over it critical support levels of 4,600-4,700 points. The performance during most of the session was satisfactory until the last hour of trading when selling pressures increased sharply. These pressures are mainly due to movements by brokerage firms to cover the credit of their customers who are trading on the margin," he added.
Darwish said that the turnover in the DFM would decline during the first week of Ramadan and may reach around Dh200m.
"It is important that the index continues to hold over its support level during the decline in turnover. We expect the turnover will start to increase by the second week of Ramadan. This may help to consolidate the market and create a bottom. This needs increasing turnover to more than Dh1bn for at least three sessions," Darwish said.
"The liquidity is still poor in the market despite some new liquidity coming in. We expect local liquidity to increase by the second week of Ramadan. This will help compensate the selling pressure by foreign and institutional investors," he said.
Darwish added that foreign investors were depending on technical analyses rather than fundamental analyses in their investment decisions. "These selling pressures will continue as long as the market is giving negative indicators about its trend. Once the DFM reverses its trend, we expect foreign and institutional investors to return strong liquidity to the market."
Waleed Al Khateeb, manager of trading at Daman Securities, agreed that selling pressure at the end of the session played a major role in the decline of the index.
"It was clear that brokerage firms were pressing their customers to sell their holdings before submitting their monthly reports. Also, increasing speculations created new pressures on the index because selling Emaar at the current levels is illogical. The lack of confidence in the market is still prevailing among investors and this is exerting pressure on Emaar's stock," he said.
Al Khateeb also highlighted the role of the ENBD stock, which helped the index to regain 50 points and narrow its losses.
"The index surged at the beginning of the session after stocks in the banking sector, especially ENBD, gained sharply. But the index turned down by the end of the session due to pressure from the real estate sector," said Al Khateeb.
High volatility
Shiv Prakash, equity investment analyst at MAC Capital, sees high volatility in the DFM after it fell to the first expected supports of 4,742 and later recovered on select buying towards the intra-day second resistance of 4,840.
The DFM then witnessed profit booking as the market saw a good rise – from 4,660 towards the high of 4842 – in the last three sessions.
He said uncertainty prevailed and led to early profit booking, but the market is still above the previous day's lows and a rally towards 5,000 is expected in the near term.
"We can see a sideways movement in the short-term but if the 4,650-level if breached we will definitely witness the continuation of the downturn trend," he said. For Emaar's stock, Prakash said a close above Dh9.55 is a must for it to be bullish, otherwise it will head towards the previous lows of around Dh8.91.