DFM retreats amid sharp drop in turnover

The sideways trading trend seen on the Dubai Financial Market during recent sessions continued yesterday amid some profit booking and sharp fluctuations in prices as speculators made quick movements.

The general index fell 7.31 points, or 0.41 per cent, to close at 1769.01 points. The market had opened in positive territory after bellwether Emaar rallied at the start of the session. The market moved into negative territory very quickly in a sharp switch as selling pressure was seen on Emaar. The stock continued to fluctuate in the downside throughout the session before closing 0.8 per cent lower at Dh3.74.

However, the selling pressure and profit-booking movements were at a moderate level as the turnover dropped significantly with 148.8 million shares worth Dh322 million changing hands. This gave a positive indicator that investors were still holding their positions in the market.

Investors started to shift to waiting mode ahead of news of the Dubai World restructuring plan. Analysts said the market had already priced in the positive sentiment generated by reports that Dubai World might submit a restructuring plan in the near future. Commentators say speculators are again taking full control of the DFM as institutional investors move to a wait-and-see strategy.

"Positive reports about Dubai World's debt restructuring plan have already created momentum in the market and individual and institutional investors were buying early this month," said Fadi Al Said, Head of Mena Equities at ING Investment.

"We have noticed good buying interest from different types of investors as the turnover jumped over Dh1 billion during some sessions. Institutional investors were buying at different levels but a good majority increased their exposure in anticipation of a good rebound."

Foreign investors were net sellers of shares worth Dh1.4 million yesterday. Despite the marginal difference between their buy and sell orders, their level of activity increased as they accounted for more than 45 per cent of the total transactions.

Al Said added that foreign and institutional investors were increasing their portfolios in the DFM as the index had reached very low levels and the downside risks were limited. "The sentiment has changed now that the market has priced in good expectations about Dubai World. We are shifting to a new mover, which will be expectations of the first quarter results. The market is expecting good results, but no surprises. Listed companies, especially banks, used the fourth quarter last year to clean up their financial statements so we expect good results this quarter."

Ziad Dabbas, a financial consultant at National Bank of Abu Dhabi, said the market was moving sideways on low turnover because sentiment among investors was still weak. "Investment decisions on stock markets have become very critical at the current stage. There are very complicated factors related to companies, sectors, the whole economy and liquidity. The liquidity is focusing on real estate stocks even though this was the sector most affected by the global financial crisis. This is a clear indicator that investors are ignoring the basics of investment standards and are gambling, not investing," he said.

Banking stocks advance

Banking stocks were the main supporter of the DFM index yesterday as the heavyweights advanced slightly during the session.

Emirates NBD continued its uptrend and advanced to Dh2.96 while DIB added 0.8 per cent to Dh2.53.

Banking stock have seen good upside movements since the beginning of the week and played a major role in supporting the DFM's gain after a three-month period during which the stocks came under strong pressure. "Positive expectations about Dubai World's restructuring plan created good demand for banking stocks after they reached very low levels due to worries about increasing provisions," said Ziad Dabbas, a financial consultant at NBAD.

Emaar sets the trend

Emaar continued to set the trend on the DFM yesterday and was the most active player even though it faced selling pressure from some speculators who were betting on the company springing a few surprises.

However, the decisions made at Emaar's board meeting were in line with expectations. The directors proposed that there should be no distribution from the 2009 earnings and decided to transfer the net profits to the reserves. The proposal will be submitted to the annual meeting next month.

Analysts believe Emaar will continue to lead the DFM in the coming weeks amid increasing rumours.

"There are rumours that Emaar will announce surprise profits for the first quarter, mainly due to the completion of Burj Khalifa," said Ziad Dabbas, a financial consultant at NBAD. "Emaar's decision not to distribute dividends was expected and we expect further buying and upside movements in the stock in the short term. Emaar is the most liquid stock on the DFM and there is increasing speculation."

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