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06 December 2023

DFM likely to stabilise near support levels

By Mohamad Al Kady

The Dubai Financial Market slipped through its important support level of 1800 points yesterday and analysts say the next two sessions will be critical for the trend.

The general index fell sharply and at the end of the day was trading near its next support area around 1750 points. However, pressure on DFM is likely to ease in the near future after leading active stocks started to hit key support levels, and the market is expected to remain range-bound over the next two weeks.

The index lost 43.60 points, or 2.42 per cent, and closed at 1759.05 as selling pressure affected most active stocks. The market opened in a sideways trend and fluctuated around 1800 points during the first half of the session. However the last hour of trading witnessed strong movements as leading active stocks, especially Emaar and Arabtec, were bleeding by the end of the session.

Emaar led the decline after pressure on Arabtec started to ease. Emaar lost 4.35 per cent to close at Dh3.74 after it went down to Dh3.72 during intraday trading.

"Emaar will continue to lead the trend on the market and the stock turned bearish yesterday," said Omar Al Kurdi, Broker for Shares and Bonds Mediation at Tadawul. "The market is trading near a critical area and should remain above 1750 during the coming two sessions.

"If the market maintains this area we expect the index to continue sideways in the range of 1750 to 1850 points. If the market breaks down, the DFM index will be facing a critical support area around 1680 points."

Amjad Bakir, VIP Portfolio Trader at Direct Broker for Financial Services, agreed that the coming two sessions would be critical for the DFM's trend.

"There are signs that the market is entering the oversold area and its next target is around 1730 points. It should rebound from these areas and may enter a sideways trend.

"Emaar will continue to lead the trend on DFM and yesterday's drop in the stock dragged the index down. Emaar looks bearish at present and its next target is around Dh3.50. The stock may rebound from these areas to Dh3.82/Dh4.14/Dh4.96."

Arabtec was among the top losers after the stock retreated by five per cent to Dh2.47. Other active stocks including DSI, DFM, Deyaar, Union Properties and Air Arabia went down during the session. In all 24 stocks declined while three advanced and only one remained unchanged during the session.

Banking stocks were bearish as DIB lost 2.58 per cent to close at Dh2.27 and heavyweight Emirates NBD fell by one per cent to Dh2.82. The banks continued to face pressure amid expectations they might increase the provisions in their 2009 financial statements, which would affect their earnings.

Turnover remained at low levels as 168.7 million shares worth Dh363.3 million changed hands. Although a drop in volumes during a downturn in the market is generally seen as a positive sign, analysts expressed concern about the decline in volumes at this point.

Al Kurdi said: "This reflects a sharp drop in liquidity on the market as investors suffer from a shortage of cash in hand," said Al Kurdi. "Banks removed a lot of facilities for their clients and brokerage firms are facing a critical lack of liquidity so they cannot support their clients or offer margin trading. The market is also waiting the implementation of margin trading rules by the Securities and Commodities Authority (SCA)."

Taimur Saadat, Head of Technical Analysis at Arab Capital Markets, said he thought DFM might stabilise in the coming two sessions as selling pressures on Arabtec started to ease. "The downturn in the DFM during the past three sessions was triggered by Arabtec. We expect the market to stabilise as Arabtec will consolidate below Dh2.40 from today.

"Arabtec and Emaar are connected and this was clear in the bearishness in Emaar. These pressures will drag the DFM index to 1,750 points and it is expected to stabilise around this area. It will move range-bound during the coming two weeks."

Institutional investors return

Institutional investors have returned to DFM as strong buyers since the beginning of January and are benefiting from the index's ups and downs over the past six weeks, according to Taimur Saadat.

"According to our data, institutional investors, including banks and companies, have been heavy buyers in the market since the beginning of the year," he said.

"Last week banks bought shares worth 44.6 per cent more than those they sold. This is a strong buying trend compared with their behaviour during December when they sold shares worth 27.5 per cent more than the ones they bought.

"This means that institutional investors are making good profits due to the up and downs in the market since the beginning of December. Individuals were the losers as they bought and sold shares at almost the same levels."

Taimur said he expected to see a minor correction on DFM in two weeks' time as institutional investors would start to book some of their profits.


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