News
Dubai bourse closes flat with new liquidity
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The Dubai Financial Market (DFM) yesterday failed to sustain Wednesday's technical bounce, but analysts said new liquidity entered the market, giving fresh hope for an uptrend next week.
Analysts voiced satisfaction over the new liquidity entering the market, which they consider "real" and not speculative liquidity.
There were mixed expectations about the direction of the market during the coming period, but the general sentiment focused on the importance of increasing real liquidity.
The DFM General Index declined 12.57 points, or 0.26 per cent, and closed at 4,789.81 points. The market could narrow its losses after the index dropped by about 60 points during the first hour of trading and tried to rebound during the rest of the session but failed to reach the closing of Wednesday's session.
Most analysts were counting on the rebound to continue. They were hoping that this will lead to stability in the market for some sessions, besides creating a base for a bottom in the short term.
However, turnover dropped by about 35 per cent in the session compared to Wednesday, giving a positive signal that the selling pressures during the downturn trend has reached low levels.
Analysts believe the current decline has been fuelled by a wave of profit taking.
Trading volume declined sharply to 140.8 million shares yesterday, compared to more than 282 million shares in the previous session. Trading value also declined to Dh652.5 million, compared to the robust Dh1.09 billion on Wednesday.
Analysts also cited another factor for the current decline, which is the movement by brokerage firms to cover the credit of their customers before submitting their reports to the Emirates Securities and Commodities Authority (ESCA). They said the ESCA will start implementing new regulations to submit these reports on a daily basis by the beginning of September.
This is expected to limit brokerage firms from offering margin-trading facilities to their customers, but will improve the performance of stock markets in the long term.
Nour Al Zouby, general manager of MAC Sharaf Securities, stressed that a sort of negative sentiment was still prevailing among investors so there were cautious movements in the market.
"The liquidity that entered the market during the last two sessions is real liquidity, not speculative. The market was dominated by speculators and short-term investors during the past few weeks. Also, foreign intuitional investors were selling heavily during the past two months.
"Now, we have noticed new liquidity entering the market and we think this liquidity came from local institutional investors and major individual investors."
However, Al Zouby added that uncertainty is still dominating the general sentiment among investors.
"Investigation into some executives in listed companies and the recent reports about the real estate sector are still giving negative indications about real estate stocks, especially Emaar Properties, as well as the banking sector. These investigations should be clarified in the market to remove worries among investors.
"The market still needs more real liquidity, at least over the turnover in the last session. This will help create stability in the market. Despite the general trend the DFM is still in the down side. The market always appreciates during Ramadan and we hope this will happen next week," he added.
Kefah Al Maharmah, general manager of Aldar Securities and Bonds, agreed that there is new liquidity, but it has been a tentative entry and therefore failed to support Wednesday's bounce.
"Yesterday's session started with a sharp decline on low turnover with lack of buying support. The book orders were very negative because uncertainty was dominating the sentiment among speculators and small investors and buy bids of institutional and large investors were not strong enough to support the index," he said.
"The rebound in the market failed to restore trust among speculators, who will be able to increase the turnover sharply.
"The index lost around a percentage point during the first hour of trading and accordingly prices of leading stocks reached very attractive levels.
"There were encouraging buy bids by the end of the session and new liquidity started to enter the market, but the index closed in the red.
"Despite the sharp decline in turnover, the new liquidity is giving positive signals that institutional investors are returning to the market. We need to increase the positive sentiment among small investors and speculators to boost the turnover during the next few sessions," Al Maharmah said.
4,650 is key support
The DFM index should not break through the strong support level of 4,650 points because this may lead to very bearish movements in the market, warned Shiv Prakash, equity investment analyst at MAC Capital.
"One should concentrate on stocks that are on the verge of breaking their previous highs and did not participate in the recent market fall, as these can show a rapid rise on market recovery. Emaar is facing resistance near Dh9.54 areas, and a close above Dh9.55 can take it higher until the range of Dh9.70 to Dh10.25 in the short term. A close below Dh9.30 will be bearish. Tamweel and ARTC are set for a smart rally ahead."
Prakash said there might be some sideways moves during Ramadan and the trend would be stock specific. "The last two days of close above the support area of 4,650 look positive in the short term."
Analysts voiced satisfaction over the new liquidity entering the market, which they consider "real" and not speculative liquidity.
There were mixed expectations about the direction of the market during the coming period, but the general sentiment focused on the importance of increasing real liquidity.
The DFM General Index declined 12.57 points, or 0.26 per cent, and closed at 4,789.81 points. The market could narrow its losses after the index dropped by about 60 points during the first hour of trading and tried to rebound during the rest of the session but failed to reach the closing of Wednesday's session.
Most analysts were counting on the rebound to continue. They were hoping that this will lead to stability in the market for some sessions, besides creating a base for a bottom in the short term.
However, turnover dropped by about 35 per cent in the session compared to Wednesday, giving a positive signal that the selling pressures during the downturn trend has reached low levels.
Analysts believe the current decline has been fuelled by a wave of profit taking.
Trading volume declined sharply to 140.8 million shares yesterday, compared to more than 282 million shares in the previous session. Trading value also declined to Dh652.5 million, compared to the robust Dh1.09 billion on Wednesday.
Analysts also cited another factor for the current decline, which is the movement by brokerage firms to cover the credit of their customers before submitting their reports to the Emirates Securities and Commodities Authority (ESCA). They said the ESCA will start implementing new regulations to submit these reports on a daily basis by the beginning of September.
This is expected to limit brokerage firms from offering margin-trading facilities to their customers, but will improve the performance of stock markets in the long term.
Nour Al Zouby, general manager of MAC Sharaf Securities, stressed that a sort of negative sentiment was still prevailing among investors so there were cautious movements in the market.
"The liquidity that entered the market during the last two sessions is real liquidity, not speculative. The market was dominated by speculators and short-term investors during the past few weeks. Also, foreign intuitional investors were selling heavily during the past two months.
"Now, we have noticed new liquidity entering the market and we think this liquidity came from local institutional investors and major individual investors."
However, Al Zouby added that uncertainty is still dominating the general sentiment among investors.
"Investigation into some executives in listed companies and the recent reports about the real estate sector are still giving negative indications about real estate stocks, especially Emaar Properties, as well as the banking sector. These investigations should be clarified in the market to remove worries among investors.
"The market still needs more real liquidity, at least over the turnover in the last session. This will help create stability in the market. Despite the general trend the DFM is still in the down side. The market always appreciates during Ramadan and we hope this will happen next week," he added.
Kefah Al Maharmah, general manager of Aldar Securities and Bonds, agreed that there is new liquidity, but it has been a tentative entry and therefore failed to support Wednesday's bounce.
"Yesterday's session started with a sharp decline on low turnover with lack of buying support. The book orders were very negative because uncertainty was dominating the sentiment among speculators and small investors and buy bids of institutional and large investors were not strong enough to support the index," he said.
"The rebound in the market failed to restore trust among speculators, who will be able to increase the turnover sharply.
"The index lost around a percentage point during the first hour of trading and accordingly prices of leading stocks reached very attractive levels.
"There were encouraging buy bids by the end of the session and new liquidity started to enter the market, but the index closed in the red.
"Despite the sharp decline in turnover, the new liquidity is giving positive signals that institutional investors are returning to the market. We need to increase the positive sentiment among small investors and speculators to boost the turnover during the next few sessions," Al Maharmah said.
4,650 is key support
The DFM index should not break through the strong support level of 4,650 points because this may lead to very bearish movements in the market, warned Shiv Prakash, equity investment analyst at MAC Capital.
"One should concentrate on stocks that are on the verge of breaking their previous highs and did not participate in the recent market fall, as these can show a rapid rise on market recovery. Emaar is facing resistance near Dh9.54 areas, and a close above Dh9.55 can take it higher until the range of Dh9.70 to Dh10.25 in the short term. A close below Dh9.30 will be bearish. Tamweel and ARTC are set for a smart rally ahead."
Prakash said there might be some sideways moves during Ramadan and the trend would be stock specific. "The last two days of close above the support area of 4,650 look positive in the short term."