The Dubai Financial Market took some analysts by surprise yesterday to close in the green for only the second time in the past two weeks.

Many brokers had predicted further declines amid continued regional instability, but the DFM's General Index instead started in confident mood to surge almost 80 points in early trading.

The bulk of these gains were subsequently eroded to leave the index up 0.54 per cent - or 28 points – at 5,316 by the close.

However, yesterday's gains may offer scant respite, with further declines expected today, according to Ayman El Saheb, Darahem Financial Brokerage director of operations.

"Yesterday's rebound was predictable," said Saheb. "If you study the history of the market over past few months, Tuesday has always been the worst day and I believe this is because brokerages close margin calls on this day. Settlement takes two days, so the brokerages have the money back in their bank accounts by Thursday and so can avoid paying interest for two days over the weekend. Investors were trying to sell yesterday at higher prices before the usual Tuesday slump."

Emaar was the prime factor in Dubai's minor upturn, with the property developer recovering from Sunday's 11 month low to climb 1.48 per cent to Dh10.30, although it remains down more than five per cent in July.

Turnover was up 61 per cent on the day before to reach Dh1.1 billion, with a resurgent Ajman Bank the centre of attention. The volatile lender claimed half of the 285 million shares that changed hands on the DFM yesterday to surge 6.44 per cent and become Dubai's top performer.

Air Arabia also enjoyed significant buying to climb 0.62 per cent – or one fils – to Dh1.63, but like Emaar, July has been a torrid month for the budget carrier and it has lost 11 per cent so far this month.

After Ajman Bank and Air Arabia, Gulf Navigation and Deyaar were next most active stocks, but the former was unchanged and the latter fell by one fils to Dh2.05. DFM Company edged up 0.2 per cent to Dh4.84.

Dubai banks were robust with Emirates NBD climbing 1.66 per cent, while Dubai Islamic Bank also made minor gains.

Arabtec jumped 4.81 per cent to Dh18.50 and a new record high, with the construction giant trebling in value over the past 12 months. "The stocks that made the largest gains yesterday are likely to be hardest hit today," said Saheb. "Penny stocks are the prime targets for speculators and I doubt that these were bought with actual cash, but funded through leverage, and so with the margins closing tomorrow, these are stocks most liable to fall today."

Saheb cited Gulf Navigation's performance yesterday as evidence of short term trading ahead of the likely Tuesday decline. This stock climbed more than three per cent in early trading only to see these gains wiped out. "Other stocks such as Ajman Bank and Emaar saw a lot of buying towards the end of the session and so will probably correct today," said Saheb.

Saheb is upbeat over Dubai's prospects for the coming six weeks, saying the summer slowdown was exaggerated.

"Last August was phenomenal and we might see a rally come earlier this year – July could yet be a positive month," said Saheb.

"Looking forward the index will probably keep moving in a very tight band."

 

'Local' investors redefined for Shuaa

From today, Shuaa Capital will be allowed to treat Gulf nationals the same as UAE nationals in a move likely to be followed by other UAE-listed companies. The UAE regulator has approved the redefinition of what are considered local investors in a decision that will enable increased foreign ownership.

UAE nationals must own at least 51 per cent of a company's stock. While this requirement remains in place, the reclassification of GCC nationals will mean more stock is available to foreigners from outside the region.

Shuaa Capital is near its 49 per cent foreign ownership limit, so this amendment should help its ailing shares. The company's stock plunged 4.37 per cent to Dh6.55 yesterday, its lowest close since late February and some 24 per cent below June's all time high. A statement from Shuaa claimed the rule change has freed up 21 per cent of the company's shares to international investors.





Daily turnover up

From a technical perspective, the DFM will open today at just below some critical resistance at 5,323 points. If this is breached, the index could climb until its next hurdles at 5,357 and 5,399.

However, if it fails to crack the first barrier, then the market could slide to 5,281 or even 5,247, according to Mac Capital Advisors.

Interestingly, Dubai's daily average turnover has actually increased so far this month to Dh1.27 billion, compared to Dh1.17bn in June.