The Dubai Financial Market's recovery gathered pace yesterday as turnover almost tripled from the day before following a strong rally in Japanese markets and better-than-expected US housing data.
Real estate-related firms were the main local beneficiaries of increasing optimism that the savage stock slump may have been exaggerated as all other Gulf markets also made gains. This helped the DFM's General Index climb 1.86 per cent to 1,533 points, the fourth successive advance and its highest finish for five sessions.
However, the DFM is still down 6.3 per cent this year, having plunged 72 per cent in 2008, and the ongoing rise remains within the context of a brutal bear run. "This looks like a good gradual recovery after last week's slump," said Mohammed Ali Yasin, Shuaa Securities CEO. "Year to date we are still down, so we're trying to recover little by little.
"Sentiment has driven the market's decline, not fundamentals, because no one is expecting company profits to drop 70 to 80 per cent, yet that is how much stock prices have fallen and so they're definitely oversold."
The five most-active stocks advanced for the second session running to offer a further indication buyers are at last in the ascendancy. Turnover jumped to a six-session high Dh297 million as Emaar accounted for almost a third of this after seeing Dh92m shares change hands. This helped the developer climb 5.23 per cent to Dh2.01, although it did see some limited profit taking towards the close.
Arabtec was also in demand with Dh66m traded to surge 10.8 per cent to Dh1.23, while third-placed DFM Company's Dh37m of trading enabled it jump 7.22 per cent to Dh0.89.
Air Arabia and Deyaar completed the top traders as this duo advanced 4.54 and 7.84 per cent, respectively. "Sentiment on Arabtec is shifting as panic and fear are now giving way to fundamentals and thinking that maybe too much bad news is priced in," said Matthew Wakeman, EFG-Hermes managing director for cash and equity linked trading.
Meanwhile, Deyaar's robust full-year results have helped soothe fears over the health of Dubai's real estate sector, analysts said.
"Deyaar was still able to achieve strong numbers in the fourth quarter despite the slowdown and is a good indicator that it should continue to do well in 2009, even in a tougher operating environment, although this will have to be confirmed by the Q1 figures as well as the annual results of Emaar and Union Properties," said Yasin.
Banking floundered, with Emirates NBD dropping 4.9 per cent to Dh3.30 on meagre volumes. Commercial Bank of Dubai also struggled, slipping 1.31 per cent, but Dubai Islamic Bank surged 3.48 per cent to Dh1.78, its best finish for a week.
"Overall, the market is still trading in the bearish territory and is below both the 14-day moving average and the long-term trend line," said Shiv Prakash, a Mac Sharaf Securities technical analyst. "Bullishness in the near term will be seen only on a breakout above the 1,650 resistance. We are witnessing a corrective bounce of the fall from 1,800 levels to the recent lows. Most investors are awaiting last quarter results and thus volumes are low."
Banks may miss February 15 results deadline
Mohammed Ali Yasin, Shuaa Securities Chief Executive, has criticised the UAE Central Bank for a likely delay in the release of domestic banks' results following the implementation of tougher reporting requirements.
"The Central Bank's move is very welcome, but it's an ongoing process and we have known about the financial crisis for many months and so there's no excuse for delaying results," said Yasin. The Central Bank has told banks not to publish their results until it gives them approval, which is likely to mean many banks will miss the February 15 deadline.
"The banks aren't happy about this delay," said Yasin. "They don't need to come up with the definitive numbers right now, but a 90 per cent forecast would greatly support the market – delaying results only delays any market recovery.
"In their absence, rumours will take their place and that will be negative for the market. Postponing results until March would be a backwards move."
Meanwhile, corporate transparency continues to be inadequate, with some firms issuing bullish statements claiming their performance will be unaffected by a pan-national recession, only to subsequently announce recruitment and project freezes a few weeks later, Yasin warned. Similar denials were made last summer over a likely downturn in property prices, only for this to swiftly become reality.
"Most analysts are forecasting a 15 to 20 per cent recovery on the UAE stock markets in 2009, which shows that worries persist, particularly about Dubai's debt, while contradictory company announcements are not helping," said Yasin.
"This is harming credibility and will only slow stocks' recovery because investors are rightly sceptical."