Dubai bourse rises amid weak turnover and lack of buying interest
The Dubai Financial Market (DFM) bounced up yesterday on positive earnings and news about some listed companies even though the turnover remained weak with investors still awaiting results of bellwether Emaar.
The DFM index added 15.99 points, or 0.98 per cent, and closed at 1646.80 points yesterday. The market opened in the positive area and fluctuated on the upper side throughout the session. The index tested its critical level of 1650 points during intraday trading but could not maintain its gains and closed below it.
Turnover remained low, with 145 million shares worth Dh230 million changing hands during the session. Emaar continued to lead the market, garnering around 40 per cent of the turnover.
"The market bounced at very low turnover, which is causing investors to worry about the ability of the index to continue its upward movement," said Kefah Al Maharmah, General Manager of Aldar Securities.
"Speculators and daily traders are in control of the DFM, while major investors and institutions are on the sidelines. They are waiting for results from leading movers in the market, especially Emaar and the banking sector,'' said Al Maharmah.
"There is a deep shortage of liquidity and the turnover does not reflect real trading because speculators are turning over the same liquidity several times during the same session," he said.
Omar Al Kurdi, Financial Analyst at Tadawul Shares and Bonds Mediation, agreed that the market is awaiting Emaar's results, which will be critical for its direction. "Investors are eying Emaar's results to decide their future investments. There is liquidity outside the market and until Emaar announces its 2009 earnings the DFM index will continue to move up and down in a narrow range," he said. "The market tested its critical level of 1650 points yesterday and it can move up to 1725 points, but this needs strong news and new liquidity. Buying interest is still weak in the market."
The bullish movement was across the board yesterday as 17 stocks advanced and nine remained unchanged, while only two stocks retreated. The movements were in a narrow range in most stocks and some advanced at extremely low volumes.
"This is an essential problem in the market – Emaar leads the sentiment in all stocks regardless of the fundamental factors. The correction in global markets cannot justify this behaviour because in the Dow Jones, for example, there is a mix of gainers and losers," said Al Maharmah.
He added that the market has also ignored positive results and cash dividends that several companies have announced so far. "There were better than expected earnings and very generous cash dividends in view of the current market conditions. Institutions and high-net wealth investors did not react to these developments and remained outside. This is increasing concerns in the market and may exaggerate the impact of the corrections in global markets."
Sami Saydam, CEO of Vip Gold & SS Forex, said the correction in global markets has come after a strong rally in 2009, while GCC markets in general remained on the downside throughout last year.
"Global markets have rallied to high levels, with the Dow Jones reaching very near its pre-crisis levels and the correction is normal. This situation is putting more pressure on the UAE stock markets, which we expect to fluctuate in a narrow range of 200 points up or down during 2010. This narrow movement will not encourage investors to inject more liquidity in the markets,'' said Saydam.
SALAMA LEADS GAINERS, ATTRACTS GOOD VOLUMES
Islamic Arab Insurance Company (Salama) led gainers in the DFM yesterday, adding 8.75 per cent to close at Dh0.87. It also attracted good trade volumes and joined the top active list after the company posted a net profit of Dh116.2 million in 2009, compared with a net loss of Dh8.2m in 2008.
Full-year net operating profits rose to Dh184.3m versus Dh164.4m in 2008, the company said in a statement on the exchange. Earnings per share for 2009 were Dh0.11, compared with a loss per share of Dh0.01 in the previous year.
"Despite the reaction being positive, it was limited due to the low liquidity in the market. The Salama stock has seen minor movements during the past 12 months and the positive results did not attract long-term investors. Speculators used the news to achieve quick gains," Omar Al Kurdi said.
Arabtec advanced significantly at the beginning of the session after the company announced that it had been awarded a contract for the construction of a five-star hotel in Syria worth $67m.
The stock rallied to Dh2.29 on the positive news and fluctuated in the positive area throughout the session before reducing its gains and closing at Dh2.27, a gain of 1.8 per cent.
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