DFM makes limited gains but turnover plummets

The Dubai Financial Market made a limited recovery yesterday, while the Abu Dhabi bourse was virtually unchanged.

Turnover on the DFM's General Index slumped to it lowest in May, with just Dh574 million shares changing hands. The Abu Dhabi Securities Exchange was buoyant in comparison, with total trading topping Dh2.4 billion. The capital's market typically has fewer leveraged traders and so has been less affected by the now-normal end of month slowdown.

Perhaps more importantly, the ADX also promises bigger profits and so investors have not yet cashed in all their recent gains. This reticence helped the ADX limit its daily losses to 0.02 per cent and close on 5,015 points, leaving it up 1.1 per cent this week.

The DFMGI climbed 0.23 per cent to 5,650 points, but it clawed back little of Monday's losses as investors largely remained aloof.
"Momentum is difficult to maintain at the moment," said Julian Bruce, EFG-Hermes director of institutional equity sales.

"Local investors are still looking to book profits whenever they can and both markets are moving in a very tight trading range with occasional anomalies such as Rak Cement."

The latter surged surged 4.47 per cent after seeing 162 million shares change hands, which is 17 times the company's 52 week daily average. Rak Cement has jumped 50 per cent since May 14 and 36 per cent in the past four sessions alone. Normally, a news leak of an imminent major announcement would be the cause of such a rapid ascent, but Rak Cement yesterday issued a statement saying it had no idea why its stock has moved this dramatically and so the rally must have been driven by a speculative frenzy, analysts say.

Meanwhile, Deyaar was Dubai's top trader, with 20.5 million shares changing hands, to help it edge up 0.44 per cent – or one fils – to Dh2.27.

It was a similar story for the rest of Dubai's five most active shares, with two – Union Properties and Dubai Investments – rising less than one per cent and two – Gulf Navigation and Air Arabia – closing unchanged.

Emaar also remained static at Dh11.30, despite claiming almost a fifth of Dubai's turnover. DFM Company and Dubai Islamic Bank fell by 0.34 and 0.33 per cent respectively, with the latter slumping to its lowest close since January 22. Shuaa Capital was another to close flat, with the company declining in early trading despite Monday's announcement of a Dh0.45 per share dividend, which is the equivalent to a 5.4 per cent return, based on yesterday's closing price of Dh8.28. Like Arabtec, Shuaa is currently handicapped after reaching its foreign ownership limit of 49 per cent.

Back on the ADX, real estate was for once off investors' radar, although companies in related industries were in high demand. Arkan Buildings Materials and Ras Al Khaimah Cement claimed close to half of the 655 million shares traded on the ADX, with the former climbing 3.41 per cent. Arkan's latest gain enabled it post a new all-time high of Dh5.76, confounding many sceptics who warned the company's prices bears no relation to its fundamentals.

Aldar retreated after four days in the green, slipping 1.21 per cent to Dh12.20, and rival Sorouh Real Estate fared even worse, dropping 1.53 per cent.

"The Abu Dhabi real estate sector has enjoyed good gains, but even these stocks fell yesterday after coming under selling pressure, mainly from local investors taking some of their money off the table," EFG's Bruce.

Demand for the capital's property stocks has little chance of abating, with Abu Dhabi's major developers unable to keep up with demand from prospective buyers.


What would it take to get the markets moving?

There is little hope of the UAE markets escaping their stubborn sideways range in the near future, according to Julian Bruce, EFG-Hermes director of institutional equity sales.

"Banks are just treading water, while good first quarter results have not provided the kicker for the market that many had hoped for, and so we remain in a consolidation phase," Bruce said. "There's some concern we might not see a market catalyst before the expected summer slowdown."

Part of this fear is based on slack interest from foreign institutions, which has increased slightly last week when the DFM staged a London roadshow, but since diminished.

Bruce added: "What would it take to get the markets moving? Well new foreign investors could be the spark, but I don't think there will be a significant move by overseas players in the next two to three weeks."

The sudden influx of mega foreign money was the driver behind last autumn's startling rally, which saw the DFM jump 40 per cent in the final three months of 2007. These overseas funds were attracted by intense speculation of an imminent revaluation of the dirham, which would have boosted the value of all dirham-denominated assets.

Of course, the revaluation never happened and a change to the UAE's currency now seems as far away as ever, despite reports the US is now more relaxed about the Gulf states forging ahead with their own monetary policy.