Dubai stocks are expected to bounce today leaving behind a strong correction triggered by the downturn in global markets and the negative sentiment among investors over the weekend.
Despite losses yesterday, the Dubai Financial Market (DFM) index managed to close above its support area of 1615-1630 points, which is a positive indicator that the market may bounce up again to its next resistance area of 1670 points this week.
Yesterday, the DFM index lost 32.40 points, or 1.95 per cent, and closed at 1630.81 points during a general bearish sentiment as leading active stocks, especially in the real estate and construction sectors, faced selling pressures throughout the session.
Bellwether Emaar retreated 3.32 per cent to close at Dh3.20 after managing to narrow a strong intraday loss when it went down to Dh3.14. Arabtec also lost 2.62 per cent to close at Dh2.23 while UPP managed to close flat at Dh0.53.
"The downturn in the market is still a corrective move, which is good compared with downturns in global markets," said Ahmed Tabbo, Financial Analyst at Darahem Brokerage. "The market maintained its support areas and looks to bounce in the near term. Despite the fact that the downturn was triggered by global factors, any bounce will de pend on local factors, especially the earnings of leading active stocks in the market.
"Emaar's results for 2009 will be very critical in the market during the coming weeks. Positive earnings of the company will push the index higher to break through its resistance level of 1660-1670 points and we can see a strong rally across the board. However, any negative results will lead to bearish movements in the market."
Ehab Rashad, Trading Manager of Direct Broker for Financial Services, predicted an imminent bounce in global markets, which would reduce pressures on the DFM.
"The Dow Jones is expected to bounce this week and this will reverse the sentiment among investors here. We expect the DFM to test its resistance area of 1670 points during the coming bounce," he said.
The downturn at the DFM came at a very low turnover, with 124.7 million shares worth Dh205.2 million changing hands yesterday. Trading concentrated mainly on Emaar and Arabtec, and the two scrips dominated around 55 per cent of the total trade value.
"Turnover remained very week yesterday – around the lowest levels so far this year. Despite positive indicators in the market, the turnover is still worrying. We need trade values to increase significantly to around Dh450m per session to ensure that the market stabilises and holds its current levels," Rashad said.
Tabbo said the shortage of liquidity was the main negative factor in the market at present. "Investors are split into two main groups: the first is those who bought stocks at higher prices and are waiting for a bounce in the market to regain their capital investments or at least narrow their losses. They are not ready to inject new liquidity in the market."
The banking sector added more pressure on the DFM index yesterday with heavyweights EmiratesNBD and DIB retreating by 2.75 per cent and 1.83 per cent respectively. CBD also retreated by 1.83 per cent while Mashreq Bank remained flat.
Shuaa drops after results
Shuaa Capital was the top loser among UAE stocks at the DFM yesterday, tumbling 7.46 per cent to close at Dh1.24. The stock took a strong hit after the company reported a net loss of Dh529.8 million, including investment impairment charges of Dh312.2m and provisions of Dh210.5m for 2009.
The net loss in the fourth quarter of 2009 was Dh154.3m, compared to a net loss of Dh577.4m in the fourth quarter of 2008. The fourth quarter results reflect Dh53.2m of impairment charges and provisioning of Dh89.8m.
The stock faced selling pressures in the market as investors were expecting better 2009 results from the company. Analysts said regional and global markets rallied during the year and investment firms were able to achieve good profits or at least narrow their losses, so Shuaa's results were disappointing.
Aramex fluctuated in the downside yesterday and closed slightly lower at Dh1.68 despite the company announcing net profits of Dh49.5 million for the fourth quarter of 2009, a 28 per cent increase compared to the Dh38.8m reported in the same period of 2008.
Full-year profits surged by 25 per cent to Dh184.3m, compared with Dh147.3m in 2008. However, 2009 revenues dropped by six per cent to Dh1.961 billion, compared to Dh2.080bn for 2008.
The stock faced profit booking on the announcement of its results after it rallied during the past two weeks on expectations of positive earnings.
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