The sentiment on the Dubai Financial Market has reversed dramatically after the Dubai Government launched a $20 billion (Dh73.45bn) bond programme, with the first tranche of $10bn fully subscribed by the UAE Central Bank.
The DFM general index was expected to face more profit-booking pressures after it rallied since the beginning of the month, but the sentiment totally changed with all segments of investors heavily buying in the market, pushing the index up 121.10 points, or 7.91 per cent, to 1652.98 points yesterday.
All active stocks aggressively advanced by almost their upper limits in a session of high turnover as trade volume recorded 929.7 million shares and trade value reached Dh1.196 billion, around triple the average turnover since the beginning of the year.
The positive sentiment also helped investors to hold on to their positions after the market opened the week with panic selling. The number of deals yesterday declined to around 14,600 deals, compared to 18,400 deals during Sunday's session, a development that was seen by analysts as an indicator for a decline in panic movements in the DFM and more concentration on deals.
"Dubai market is following news for a long time and yesterday session was a clear example as the sentiment suddenly changed after good news about the Central Bank's participation in Dubai bonds programme. The market was expected to face more profit booking, but this positive news turned the sentiment and buying was very strong on all active stocks," explained Taimur Saadat, a senior analyst at Arab Capital Markets Resource Centre.
He said the increasing turnover during bullishness in the market was giving positive indicators that the DFM index might continue its upward trend today until it reaches its next critical resistance level at 1800 points.
"The market will face a resistance point at 1680 points and we expect it will break this resistance easily, may be today. This will take the index to the next resistance of 1800 points this week before it will return back on profit booking to the level of 1600 points."
"The DFM will witness more bullish movements, but with less aggressiveness than yesterday session. We expect the index will add around three per cent during the next two sessions," Saadat added.
Sherif Abdul Khalek, institutional trading manager at Beltone Financial, agreed that the DFM faced aggressive profit taking movements by the beginning of the week that gave negative indicators for investors.
"Despite there were high expectations that panic profit booking will create more pressures on the DFM index, the sentiment fully reversed after the announcement of Dubai bonds programme. We cited all segments of investors turning strong buyers in the market. There were strong movements by local, regional and international institutions yesterday as they turned strong buyers," he said.
"The announcement of Central Bank's strong contribution in the bonds programme could totally undermine rumours about credit of Dubai government-related companies and the federal government's actions. This move clearly showed that the federal government is very supportive to Dubai development process. The unsecured bonds programme pays a fixed yield of four per cent annually and this is very low rate compared to the international market conditions. This is reflecting strong fundamental in the programme and increased confidence among investors," he said.
ADX likely to remain Bullish in short term
Abu Dhabi Securities Exchange is projected to remain bullish in the short term after it could give indicators for a confirmation above its resistance level of 2250 points.
The ADX continued its steady upward trend and advanced for the fourth consecutive session after it added 24.05 points, 1.06 per cent to close at 2298.65 points.
The turnover also continued to increase as 212 million shares changed hands at a total value of Dh340.5 million, compared to the average trade value since the beginning of the year, which reached Dh193m.
Real estate and energy stocks continued to dominate transactions in the market, with Sorouh, Aldar, Dana and Aabar attracting more than 60 per cent of the total turnover.
According to analysts, the ADX is giving steady bullishness and is heading towards its major resistance at 2300-2400 points. There are also expectations that the market will continue its minor rally on the short term due to the lack of strong speculations and low volatility in the market
"The ADX is showing strong and steady movements in the upward trend on the short term. We expect the market will hit 2328 points very soon. However, the market is projected to face some profit booking pressures this week which may drag the index to 2260 points," said Taimur Saadat, a Senior Analyst at Arab Capital Markets Resource Centre.
He also expected rallies in the energy and banking sectors on the short term.