The Dubai Financial Market (DFM) closed almost flat at the end of yesterday's trading after the index failed to maintain the bounce that started at the beginning of the session.
By the end of the day's trading it had lost most of its gains from the opening bounce, which was expected after three sessions of continuous decline earlier in the week.
The DFM index gained 3.72 points, or 0.26 per cent, to close at 1,458.05 yesterday. However, it fell short of analysts' expectations, despite the turnover more than doubling compared to the previous session.
The turnover surged considerably as 260.5 million shares changed hands at a total value of Dh259.3 million. Arabtec's stock dominated around 45 per cent of the turnover and 25 per cent of the total number of deals.
The stock suffered strong selling pressure, as it fell by 9.30 per cent to close at Dh0.78. However, Emaar's stock advanced 3.38 per cent to Dh1.83 and helped reduce the impact of the downturn of the Arabtec stock on the index.
"DFM got off to a strong start that lasted for the first 30 minutes of trading, touching the intraday second resistance level near 1,495 points, but later met selling pressure on higher levels as investors used this rise to exit," said Shiv Prakash, technical analyst at MAC Capital Advisors. "The upward move in the local markets was seen on account of the positivity in the global markets. At the end of the session, the DFM fell to the previous day's closing level and closed just marginally higher at 1458.03 points," he said.
Prakash said Arabtec, in its continued fall, met its expected level of Dh0.80 and dived below it to a final Dh0.78. "The stock still stands bearish on the technical charts. Emaar went higher, touching the intraday resistance near Dh1.94, and later fell on selling pressure with a net gain of 3.38 per cent. The DFM stock had a good start in the opening session, touching a high of Dh0.83, and closed with a marginal gain of 1.31 per cent to Dh0.77."
The issue of shortage of liquidity and negative investor sentiment continued to be the main story in the market. Analysts had said the DFM had a potential opportunity for a strong bounce, but the quick profit taking by short-term investors ended any such hopes, while major investors and banks were selling to cover their positions.
"The shortage of liquidity in the markets has become a critical issue. The DFM was expected to have a strong upward bounce this week after several sessions of retreat. The session started with strong indications for this upward trend, but the movement changed quickly under strong selling pressures," explained Humam Al Shamaa, consultant of Al Fajr Securities.
He blamed movements by some banks and funds to liquidate their positions in the market as the main factor behind the failure to rebound. "It is clear some banks moved to liquidate their investments as part of their efforts to secure cash. They are facing critical situations because their loan books have exceeded deposits and they need to cover their positions by getting liquidity out of the markets.
"Investment funds also have increasing pressures from their investors to liquidate their holdings. They need immediate cash after suffering major losses during the last few months," Al Shamaa said.
He also highlighted the negative sentiment among major investors who refrained from building long-term positions in the market, focusing instead on speculative movements.
"There are no long-term positions at all. Most investors are focusing on quick ins and outs in the market. This is clear in the vertical fluctuations in the index." Al Shamaa asked for the government to take immediate action to stop the bleeding of the markets. "We need new liquidity. There should be a rescue plan by injecting liquidity in the market through a governmental fund. The government should also intervene in the banking and real estate sectors, which have become the main drivers behind the deteriorating situation in the markets."
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