The Dubai Financial Market retreated yesterday amid profit booking on leading active stocks that had tested critical resistance levels during early trading.
The general index lost 11.12 points, or 0.63 per cent, to close at 1,763.31 points. The market opened in positive territory and continued its rally to test the resistance area of 1780 points during the first hour of trading.
Profit-booking pressure then pushed the index down sharply as it lost around 27 points. The market later fluctuated in negative territory but narrowed its losses by the end of the session.
Emaar Properties led the trend on the market as it rallied to its resistance area of Dh3.90 in early trading before falling to Dh3.76 and closing at Dh3.77, down 2.08 per cent.
All the top active stocks faced profit booking and ended the session down, with the exception of DIB and Air Arabia which closed flat. DFM shares faced downside pressure and lost 2.16 per cent to close at Dh1.81, while Arabtec retreated 0.9 per cent to Dh2.21.
The profit-booking movements came after the DFM index witnessed strong gains of around 11 per cent so far this month, while leading active stocks including Emaar and DFM gained more than 25 per cent. This rally came on the back of reports that an agreement on Dubai World's debt restructuring plan would be announced very soon.
There are increasing rumours in the market about the timing of an official announcement, with some expecting it this week. However according to analysts, the market has already priced in most of the expected positive news and will experience sideways trading until the announcement is made.
"There is a pause in the DFM's rally and the index is likely to move sideways between its support and resistance areas during the current period," said Mohamad Al Beheiri, Trading Manager at Tadawul Shares and Bonds Mediation.
Turnover retreated during yesterday's correction in the market with 255.6 million shares worth Dh570.3 million changing hands. Emaar continued to dominate transactions in the DFM as it attracted more than 55 per cent of the total trade value.
Abul Hakim Jamil, a trader at Brooge Securities, said the profit booking had been expected but the sharp fluctuations in prices were a surprise.
The index's sharp fluctuations reflected strong movements by speculators who benefited from wide price gaps in leading active stocks. However analysts see signs of accumulations by institutional investor.
Emaar in the limelight
Rumours about Emaar spread through the market yesterday on the eve of a board meeting that will convene immediately after trading ends today.
The directors will discuss the distribution of dividends in respect of the developer's 2009 earnings, among other topics. It will also discuss Emaar's governance policies and procedures.
The rumours concerned the possibility that there would be a distribution after the company did not pay any dividends for 2008.
Abul Hakim Jamil expected the Emaar rumours would plague trading today even though there were no expectations of major decisions or dividends.
Emirates NBD leading supporter of Dubai bourse
Heavyweight Emirates NBD was the leading supporter of the DFM index yesterday as the stock advanced 3.64 per cent to close at Dh2.85. DIB managed to close flat at Dh2.47 after facing downside pressure during early trading.
Emirates NBD's gains absorbed most of the downward pressure from the top active stocks and helped narrow losses on the market even though the bank advanced on very low turnover.
Analysts say the banking sector is still benefiting from positive sentiment regarding the restructuring plan of Dubai World debt. "Banks are still lagging behind other active stocks and investors are waiting for the official announcement," said Mohamad Al Beheiri. "We expect a very strong rally in banking stocks once there is a final deal as this will be a major relief for investors."
DIC faces strong selling pressure
Dubai Investments (DIC) faced strong selling pressure yesterday as it retreated by 4.67 per cent to close at Dh1.02, wiping out most of the gains it made on Sunday. DIC's board approved the distribution of a six per cent cash dividend in respect of its 2009 earnings. However, the stock turned bearish after the firm announced the resignation of Anis Al Jallaf from his position on the board.