Sharp fluctuations dominated the Dubai Financial Market (DFM) yesterday as no clear trading trend emerged during the first session of the week.
The index dropped about 40 points during the first half of the session but reversed its fortunes in the second half and advanced, with some fluctuations, to end the session up 6.75 points, or 0.39 per cent, at 1,735.7 points. Turnover declined sharply to about 96 million shares, the lowest level since September 3 last year. Trade value also declined dramatically to Dh143.7 million, the lowest level since January 23, 2007.
Emaar, Arabtec, DFM and Air Arabia dominated the day. Emaar and Arabtec were losers throughout the session, putting the index under pressure. The banking sector played a major role in turning round the session as Emirates NBD and DIB advanced despite low turnover. Thirteen stocks retreated out of the 24 that were traded, with nine gaining and two remaining unchanged.
"The sharp decline in turnover reflects hesitation and high volatility in the market," said analyst Wadah Al Taha. "There were a lot of rumours in the market, especially about the merger between Tamweel and Amlak, as well as positive news about this year's Dubai budget. These developments created contradictory sentiment among investors and this was reflected in the low turnover as they refrained from selling their holdings at the current prices. Those with some liquidity preferred to wait before building new positions."
He said the large fluctuations throughout the session indicated an increasing weakness in the market even though the index closed up. "With the sharp decline in turnover markets can be driven up and down with low trade volumes," he said. "We saw inactive stocks such as Emirates NBD, which is significantly weighted in the DFM index, going up and changing the trend at very low trade volumes. The most active stocks in the market declined. We saw Emaar, Arabtec and DFM providing 72 per cent of the total turnover and their prices fluctuated sharply. This is a clear indicator of the speculative trend."
Al Taha expected DIB to join the group of active stocks that were attracting speculation during the next few weeks. "Movements in DIB stock have revealed increasing interest during the past few sessions. However, there is speculative behaviour similar to that seen with other active stocks, and this may continue throughout this month."
Shiv Prakash, a technical analyst at Mac Capital Advisors, said the index's closing price was positive as it was above the important support level of 1,720. "The market managed to close above the 1,720 support level and the corrective rally looks intact. DIB performed well following intraday support and went higher by 4.1 per cent to close at Dh2.03," he said.
Listed companies must speed up results disclosureCompanies listed on the UAE's stock markets should speed up the disclosure of their 2008 results or at least issue summaries of their financial positions in the near future, said analyst Wadah Al Taha.
"If listed companies wait 45 days from the beginning of the year to issue their final results for 2008 it will increase volatility and rumours in the markets," he said. "We need immediate action as companies can voluntarily issue summaries of their financial positions this month to alleviate worries among investors."
He urged listed companies to provide details of their projects and expected profits in 2009. "As long as there is a lack of transparency in the markets we will continue to see high volatility. Listed companies should take positive steps to explain their financial positions and their projected profits as most investors are expecting negative performances. This is putting more pressure on the UAE's markets."
DFM index may rally
The DFM index is facing resistance at 1,770 points but should break through this level to rally to between 2,000 and 2,200.
The index has a short-term support level of 1,720 and a medium-term support at 1,650 points.
The ADX index has resistance at between 2,700 and 2,800 points but is still well below this level. It has a support channel at 2,200-2,300 points.
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