The Dubai Financial Market (DFM) remained in a bullish mood yesterday despite undergoing a correction as the index managed to maintain its support levels in the area of 1800 to 1830 points.
The market is expected to face a critical test today and its ability to remain above this level will be important in determining whether it can rebound and resume its rally in the short term.
The general index lost 13.72 points, or 0.74 per cent, to close at 1836.82. The market moved in the same pattern as was seen on Sunday as it opened in positive territory and rallied in the first half of the session but then turned downwards and lost all its gains during the second half. The index moved in the same direction as Emaar as the stock rallied at the beginning of the session to Dh4.08 before facing quick profit booking and falling sharply to Dh3.96 during intraday trading. However, the last 10 minutes of trading saw buying interest that helped the stock to narrow its losses and close at Dh4.01, down 0.74 per cent.
Selling pressure during the second half of the session hit all the top active stocks including Arabtec, DIB, DSI and DFM, and they ended in negative territory with the exception of DFM, which managed to recover its losses and close at Dh1.99, up 0.51 per cent.
Speculation remained the main mover in the market as the index continued to fluctuate sharply throughout the session amid waves of buying interest followed by quick profit booking. There is currently a lack of strong movers in the market.
Turnover dropped by almost 52 per cent yesterday compared with Sunday. Around 233.5 million shares worth Dh483.1 million changed hands during the session, and DFM was the top active stock by both volume and value due to heavy speculation that saw the stock move in a relatively wide range between Dh1.97 and Dh2.04. DFM stock accounted for around 45 per cent of the total turnover.
"There are signs of de-correlation between leading active stocks, which is a positive development," said senior market analyst Wadha Al Taha. "DFM stock contradicted the trend on the market and in bellwether Emaar. Such de-correlation in leading stocks is very important as it helps fund managers to diversify their portfolios so they can inject more liquidity into the market. We expect the de-correlation to continue as investors will start to focus on the fundamentals of each company, so expect to see different movements in leading stocks."
Emaar faces pressure
Despite wide agreement that Emaar's decision to roll over its loans is a step in the right direction that will enable the company to complete its projects under construction, the market continued to exaggerate the situation amid increasing rumours among investors.
Emaar shares continued to face pressure in the second session since the company confirmed plans to roll over its loans maturing this year. "The loans maturing in the next year are primarily bridge loans for Emaar's international projects, and as per terms, are to be converted into longer term project financing," the company said in a statement. "Emaar expects the loans to be converted into project finance during this year."
Credit Suisse said in a note the decision made economic sense: "Emaar now has attractive income-generating assets that beefed up their balance sheet. Therefore, the news should be taken as neutral."
However there was selling pressure on the stock on the back of increasing rumours. "There is clear exaggeration of certain news," said Wadha Al Taha.
The first quarter results are expected to be the main movers on the market during the next few weeks as companies start to disclose their preliminary results.
Dubai Refreshment Company (DRC) was the first to announce its Q1 results yesterday that showed it made a net profit of Dh6.93 million compared with a loss of Dh2.9m during the same period last year. Revenues surged by 13.5 per cent to Dh159.8m.
DRC stock remained flat at Dh9.50.
Shuaa in positive territory
Shuaa Capital witnessed sharp movements up and down yesterday in the range of Dh1.45 to Dh1.55 before closing in positive territory.
The company faced selling pressure in early trading after Gulfinvest International, a Kuwaiti-based company, defaulted on a Dh200 million loan to Abu Dhabi Commercial Bank that was guaranteed by Shuaa. Shuaa stock later rebounded after the company announced that it had already made provisions for the loan in its 2009 financials.
"As part of Shuaa's diligent risk-management process, the firm took prudent action and made a provision for the loan guarantee at the end of the year 2009," the company said.