The Dubai Financial Market is teetering on the abyss, with analysts warning it could fall another 150 points by the end of the week.

The DFM's General Index yesterday shed 1.14 per cent to close on 5,459 points, a new two-month low as losers eclipsed gainers by six to one. These latest losses mean the bourse has dropped 1.8 per cent this week and analysts say investors should brace themselves for a further fall today.

"Dubai could slump to 5,300 by the end of the week, perhaps even today if somebody makes it drop very quickly - more money won't come into the market until it reaches this level," said Sanyalaksna Manibhandu, Emaar Saudi Financial Services head of research. "Dubai has suffered a very poor two days and I have the feeling people are getting ready for their summer break. There's no news and nothing new for people to invest in, so what is the point in taking on more risk in the stock market when things are going to be pretty much dead for the next six weeks?"

Not only did the four of Dubai's five largest active stocks fall, but so did the five most active, with only DFM Company making both of these lists.

Emaar lost 0.45 per cent to slip below Dh11 for the first time since late March, while Dubai Islamic Bank and DFM Company fell 1.69 and 4.11 per cent respectively. The latter's decline is its largest one-day reverse for more than three months. Emirates NBD provided a rare bright spot, edging up 0.42 per cent, although it is down 5.6 per cent this year.

"If Dubai does fall to 5,300, then we could see a bounce up on Sunday and Monday, the last two days of the month," said Manibhandu. Volumes were a reasonable 275 million, while turnover topped Dh1billion for the second time this week.

Ajman Bank was again the most active stock, but it endured another dismal session, falling 14.8 per cent to Dh2.87.

Manibhandu said: "Ajman Bank went up too far too quickly and has left people with no room to do anything. If you bought towards the end of its first day's trading, you would be feeling very sorry for yourself right now and if you subscribed to the IPO but didn't sell that first day then you were greedy.

"If the shares had gone up by the same amount (296 per cent), but over a few days rather than one, it would be a different story." Air Arabia also saw heavy trading, but it fell 2.11 per cent to Dh1.85, its worst finish for almost three months. Deyaar also retreated further, dropping to Dh2.10, while Gulf Navigation has failed to live up to expectations since opening up to foreign investors. Analysts had hoped it could top Dh2, but it has now fallen to Dh1.69 after peaking at Dh1.89 earlier this month.

The combined volumes of the three largest gainers was a paltry 23,000 shares. One of this trio was the Kuwait-based International Investment Group, which leaped almost 15 per cent after some its shares changed hands for the first time since November.

 

Drake and Scull IPO

Reports on Monday suggested the UAE arm of construction firm Drake and Scull will launch a Dh1.2 billion initial public offering on July 1, although this is likely to be delayed.

"In the short term this would be further bad news for the market because investors would sell other shares to subscribe to the new IPO, but in the long term it would obviously be beneficial," said Sanyalaksna Manibhandu, Emaar Saudi Financial Services head of research.

If the IPO does go ahead, then it will be interesting to see how it affects Arabtec, currently the only listed UAE construction firm.

Manibhandu said: "Arabtec shares will have some competition for the first time and I'm sure investors would want to take some money out of it and reinvest this in the new listing. Construction gives foreign investors a different dimension if they don't want a pure real estate play, as it allows exposure to the UAE's infrastructure developments."

US committee meeting

From a fundamental perspective, investors are awaiting the outcome of the two-day US Federal Open Markets Committee meeting that started yesterday.

While this is expected to keep US interest rates at two per cent, people are anxious to discover its latest outlook for the beleaguered American economy. Although there is little correlation between US and UAE markets, more bad news will swell negative sentiment globally and offer investors another reason to keep out of local equities.

"Volumes are likely to fall further. We were hoping for a bit of a rally at the end of June, but I don't think we will get that now," said Sanyalaksna Manibhandu, Emaar Saudi Financial Services head of research.

"If it doesn't materialise, people will say July is a washout, because we won't see any Q2 figures until late in the month or more likely August."