Recovering from a loss of 67.16 points or 3.81 per cent incurred in the previous four sessions, the DFM general index added 3.82 per cent to close yesterday’s session at 1692.44 points, up 62.29 points from its close of 1630.15 the day before.
“It’s a rebound, but not a very strong recovery. It happened mainly because of positive sentiments in the US and European markets. Stocks that have been recently discounted significantly supported the rebound. The latest recommendation for Goldman Sachs, from neutral to buy, has also boosted the market sentiment about banking stocks. This is one of the major triggers for this latest rebound,” Wadah Al Taha, Senior Financial Analyst, told Emirates Business.
Since June 14, when the index hit a seven-month high, the DFM lost about 25.84 per cent till Monday, and 23.01 per cent to date. The DFM opened on a higher note yesterday as Emaar and Arabtec led the gainers early in the session. Emaar picked up from its support levels and closed higher at Dh2.47, up by 8.33 per cent, while Arabtec recovered smartly and was up by 11.42 per cent at Dh2.44.
Mathew Wakeman, Managing Director for Cash and Equity-linked Trading at EFG-Hermes, said: “The market rallied on the back of strong US markets, buoyed by positive analyst comments on the banking sector. The ferocity of the rally in the UAE today is a kneejerk reaction to the recent sharp sell-off.”
In a recovering global stock market scenario, financial shares leading the US bourses overnight brought cheer to investors. This made investors more confident about the second-quarter results. Led by Japan’s Nikkei, Asian markets also snapped a nine-session fall.
“Essentially, nothing has changed and we still need tangible results to build ongoing strength in these markets. I don’t expect our markets to move on from here this week unless we get further catalysts from global markets,” said Wakeman.
Taha added: “I see some sort of correlation between regional markets and the US and EU markets. However, this is basically a psychological correlation.”
Indicating a uniform speculative buying support across verticals, 18 stocks out of the 22 that advanced on the bourse gained more than three per cent. “At this juncture, what we need to do is focus on two factors. The first is staying on the positive side regardless of profits or losses. The need of the hour is particularly to support banking and realty stocks. The second factor is focusing on real cash flows, as cost is still high in the industry. These two factors can work as an engine to sustain markets on a higher note,” said Taha.
Shiv Prakash, Technical Analyst at MAC Capital, said: “The DFM General Index opened with a higher gap, taking good supports on the expected level of 1630, which was the long-term trend line support level. It has closed above the previous highs, indicating we may see a further rise towards the 21-day moving average of 1800 in the coming sessions. There was a marginal increase in volume and we need some more volumes with the rise to confirm this as a reversal.
“Buying interest was seen at first as we were trading on strong support levels and, secondly, global markets recovered on expectations of better second quarter results.”
The DFMGI closed higher by 3.82 per cent at 1692.44 with good buying seen in the real estate sector. DarTakaful and Takaful-EM recovered to Dh2.13 and Dh1.43 respectively. Aman also went up by 7.69 per cent to Dh1.12. The DFM stock bounced by 7.35 per cent to reach Dh1.46. UPP gained ground as well by 6.17 per cent and closed at Dh0.86.
Meanwhile, DFM has convened a meeting of its board of directors tomorrow to discuss the performance for the period ended June 30. The company, in a communiqué to the bourse, said it would approve capital expenditure agreements as per the authorisation matrix for the board.
Weak trading sentiment
Trading value on the DFM has been rising during the past three sessions, albeit hovering in a restricted range. Trading turnover rose from Dh197m on Sunday and Dh286m on Monday to Dh410m yesterday. A low trading value indicates weaker market sentiment, say analysts.
“Since the trading value is less than Dh500m, it can be considered as a weak market, which is adding to volatility. The market has already discounted the second-quarter results and this is why I doubt it will move significantly when the results are announced. Unless there are some surprises, the markets may not move positively. On the other hand, buying power in the markets has vanished and a speculative pattern is hovering in the UAE in particular and GCC bourses in general,” said Wadah Al Taha.
More than 303 million shares were traded in 5,627 transactions in 25 scrips. Twenty-two stocks advanced and three declined on the Dubai bourse. The stocks that declined were Ekttitab, Emirates NBD and AlSalam-Bahrain.
Mirroring a uniform trading pattern across different sectors, all the sub-indices closed higher.
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