The Dubai Financial Market was down almost five per cent by the mid-session mark as frightened investors routed stocks across all sectors following a similar-sized fall on the Saudi Tadawul the day before.
This slump was founded on low volumes and buyers swiftly returned to pick up selected stocks at knock-down prices to help the DFM's General Index ease to a finish of 1,638 points, down 0.36 per cent. However, the latest decline extended the bourse's losing streak to four sessions to leave it languishing on its lowest close of 2009.
"Yesterday was more of a temporary reprieve," said Robert McKinnon, Al Mal Capital Managing Director of Equity Research.
"Calling the bottom is fool's game when the market is following global exchanges, like it is at present.
"Whatever happens on a Sunday is largely irrelevant because the UAE bourses are taking leadership from the main exchanges in the United States, Europe and Asia, which were closed yesterday."
While the market's decline was minor, losers outnumbered gainers by four to one and so the mood remains bearish and some profit taking is expected later today.
"A lot of investors are still incredibly uncertain and are waiting to see what happens in other markets before making a move here," said McKinnon.
"This may change as the fourth quarter and full year results are announced from this week, with investors paying particular attention to banking and real estate companies to gauge the first effects of the credit crunch."
Turnover hit a seven-session high of Dh340 million. Bargain hunters helped Arabtec become top trader as the construction firm saw Dh103m of shares change hands. Emaar was second with Dh101m, while DFM Company's Dh57m placed it third. Union Properties and Air Arabia were the only other companies to see trading exceed Dh10m.
"Trading is technically driven at present. Most market participants are short term traders and so are looking at technical analysis, rather than the fundamentals of companies," said Sherif Abdul Khalek, Beltone Financial institutional trading manager.
"This kind of volatility will continue for the rest of January."
Dubai's sudden upswing was founded upon the volatility of some key stocks. Emaar moved within a 10 per cent range and, after hitting an intraday low of Dh2.05, it recovered to climb 3.68 per cent to Dh2.25. Arabtec fell the maximum 10 per cent in early trading, only to rebound spectacularly and close up 3.33 per cent at Dh1.55.
Arabtec fell to its lower limit of Dh1.35 to spark investors into life as 20m shares were snapped up at this price, brokers report. This prompted other traders to move into the stock and help it close in the green.
Dubai Islamic Bank followed a similar pattern to Emaar to rise 1.64 per cent to Dh1.85.
"The DFM has strong support at 1,550 on the daily and quarterly charts and the previous low was around these levels," said Shiv Prakash, a Mac Sharaf Securities Technical Analyst.
"Emaar's results are due out any time. The market is full of rumours that these will be better than expected and so value buyers moved in when the stock fell early on.
"Arabtec also rebounded and this raised sentiment for real estate-related stocks, but this isn't the start of a prolonged bullish move."
Nevertheless, Prakash expects the DFM to open well today, with yesterday's late buying continuing in the likes of Emaar, Arabtec, DIB and DFM Co.
"There will be profit taking on stocks' resistance levels," said Prakash.
"The Dubai bourse has strong resistance at 1,700, but it could reach this mark if we see buying spread to other large cap stocks."
Beside Emaar and DIB, Dubai's other blue chips struggled. Emirates NBD closed flat, but DFM Company and du fell 1.68 and 5.93 per cent respectively.
Gulf General Investments was another major to slump as it plunged 7.9 per cent to Dh4.10. Six of Dubai's 10 largest stocks declined.
Volatile first half
Robert McKinnon, Al Mal Capital Managing Director of Equity Research, believes the UAE stocks are facing a volatile first half of 2009.
"In the near term, there's so much uncertainty surrounding the global economy that we will see a good few move up and down, with rallies followed by sell offs," said McKinnon.
"This means the markets won't make much progress and will remain range bound until people are confident that we are finally getting out of this mess and that could take anything from six to 12 months."
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