Selling pressure continued on leading active stocks in the Dubai Financial Market (DFM) yesterday as sentiment turned negative after the index broke below its critical support area of 1600 points.
The DFM index lost 16.51 points, or 1.04 per cent, to close at 1569.63 points yesterday. The market opened in the negative area and continued in the downside to hit 1557 points during intraday trading. It was able to narrow its losses by the end of the session despite remaining in the negative area.
Pressures were clear on real estate and construction stocks, with bellwether Emaar facing more downturns. The stock went down sharply during intraday trading to Dh2.78, its lowest level in three months. However, Emaar reduced its losses by the end of the session to close at Dh2.85, down by 1.72 per cent. Arabtec also faced selling pressures and was traded at Dh2.02 before it closed at Dh2.08.
"The downturn in the DFM gathered strength after the index went below 1600 points, which was a critical psychological level for investors," said Ahmed Tabbo, Financial Analyst at Darahem Brokerage. "After strong downside movements we expect the market to bounce up slightly in the near-term but it will remain in the downturn trend."
"The real estate sector is still creating more pressures on the DFM at the current stage because companies have disclosed negative results or have said they will not distribute dividends for 2009," said Tabbo.
"Despite the general downturn we noticed some difference in the reaction, as companies which announced positive results and good cash dividends are holding or fluctuating in a very narrow range. Air Arabia is holding its position."
Humam Al Shamaa, Financial Consultant of Al Fajr Securities, predicted further pressures from the banking sector. "There are increasing worries about financials of the banking sector and banks' ability to lend and generate revenues. This situation is deepening the downturn in the market," he said.
Turnover advanced slightly yesterday compared with the previous session, as 142 million shares worth Dh206.1 million changed hands. Emaar and Arabtec were the top active stocks and dominated almost 55 per cent of total trade values.
However, speculators continued to control the market and the increasing turnover came from quick movements due to price gaps, which were seen in leading stocks yesterday. Major individual and institutional investors remained on the sidelines.
The turnover also increased due to renewed margin calls, as some banks and brokerage firms started to press on their clients to sell their positions after prices went down, according to sources.
"Banks are pressing on investors to sell their holdings and this will create more pressure on the DFM. There are worries of a further downturn in the market but this action by the banks will deepen the downturn movement, as stocks will be offered at very low prices," said a broker who asked not to be named.
Brokerage firms are also pressing on their clients to settle their positions before they submit their monthly statements to the Securities and Commodities Authority. This move is adding more pressures on the market in the short-term.
Despite these selling pressures in the DFM, foreign investors were net buyers of shares worth Dh13.58m. This was the second successive session that foreign investors increased their buying in the market. They were net buyers of shares worth Dh24.78m on Tuesday.
Du may witness strong rally
Emirates Integrated Telecommunications, or du, is expected to witness a strong rally today after the company announced strong net profits before royalties of Dh209m in the fourth quarter of 2009.
The company also announced a big increase in its net profits, which were Dh528m before royalty payment for the year 2009, compared with Dh4.1m in 2008.
Du is expected to witness a strong rally after the DFM resumed trading on the stock late yesterday. The market suspended trading on du before the company's announcement of its results. Du was last traded at Dh2.85.
Gulfnav intensifies buyback
Gulf Navigation intensified its buyback programme and bought 10.24 million of its shares yesterday. This strong buying on the stock pushed it higher by 3.4 per cent to close at Dh0.61. The company was buying back its shares since last Thursday and most of the shares were bought in the range of Dh0.58 and Dh0.60.
With yesterday's buying, Gulfnav has bought back 30.48 million of its shares and the company can buy back an additional 135 million, according to the approval by the Securities and Commodities Authority.
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