Turnover on the Dubai Financial Market hit a new low yesterday with just 115.6 million shares worth a total of Dh119.7 million changing hands, the lowest daily trade value seen so far this year.
The DFM index lost 18.63 points, or 1.26 per cent, and ended the session at 1,454.33. The index gained 25 points at the beginning of the session but failed to maintain the rebound and turned downward very early.
Leading real estate stocks, including Emaar and Arabtec, put pressure on the index as they took strong hits and moved very close to record new lows. Arabtec retreated to almost the down limit, losing 9.47 per cent to close at Dh0.86, while Emaar declined by 5.85 per cent to close at Dh1.77. The DFM stock lost five per cent to close at Dh0.76.
However, analysts considered the sharp decline in turnover as a positive indicator that investors were refraining from selling at current prices. "The selling pressures reached a minimum level because investors of all types are unwilling to sell at the current stage," said Sherif Abdul Khalek, Institutional Trading Manager at Beltone Financial. "The DFM was moving on a sideways channel last week but turned to the downturn this week after failing to break the resistance level at 1,550 points. This downturn may take the index to the near support channel at 1,340 points."
He said all investors, both individuals and institutions, were focusing on very short-term trading rather than long-term investments. "Investor sentiment is extremely low because concerns over the performance of listed companies during 2009 became the main factor in the market. Most investors have cash but do not want to invest until they get a clearer vision of the listed companies.
"The results announced so far show the performance in 2008 was strong but there was strong declines in the last quarter. Investors are now waiting for the results of the first quarter of this year before determining any long-term positions in the market."
He said most institutional investors had strong liquidity. "The current behaviour of the market has increased worries among institutions because leading stocks were dropping to their down limits. They prefer to keep their cash until the market stabilises."
Khalek said another area of worry for institutional investors concerned government action. "They are waiting for government intervention, not only the injection of direct liquidity into the markets but also measures to restore the performance of some economic sectors, especially banking and real estate."
"We expect that the government will take action but the issue is that any measures will take a long time to change the negative sentiment in the markets.
"All international reports show the GCC is well positioned to deal with the negatives of the global financial crisis. Foreign institutional investors are eyeing the region. Any positive indicator from GCC markets will attract strong liquidity. This liquidity will start moving in by next April."
He highlighted the fall in the number of active investors in the market, which had deepened the negative sentiment. "There are few active players in the market now. Individual and institutional investors are monitoring the situation and the number of active investors must increase significantly before confidence in trading is restored."
Kefah Al Maharmah, General Manager of Aldar Securities and Bonds, said the shortage of liquidity and lack of confidence were dominating sentiment in the market and this situation would lead to further bleeding of prices.
"Listed companies have announced acceptable results compared with the situation in developed countries," he said. "They also announced cash and stock dividends that should be encouraging investors. However the reaction was very disappointing as leading stocks retreated by their down limits."
He called for immediate government intervention to stop the bleeding in the markets. "I rejected intervention in the past but now there is a need for such action because the situation has reached a very critical stage."
Selling pressure on ADX
The Abu Dhabi Securities Exchange declined for the fourth session running yesterday as it lost 48.22 points, or 2.2 per cent, to close at 2,145.46. Turnover retreated to 72 million shares worth a total of Dh143.7 million.
The ADX suffered selling pressure on most leading stocks. Real estate giants Aldar and Sorouh continued to dominate trading, with Sorouh closing on lower limits at Dh2.32 while Aldar fell by 6.87 per cent to close at Dh2.1.
Other stocks such as Aabar, Taqa, ADCB and ADIB experienced selling pressure and were bearish on the technical charts, according to Shiv Prakash, technical analyst at MAC Capital Advisors. "If the ADX remains below the pivot level of 2,161 points, we can see it falling until the 2,129-2,113 support levels. Bullishness can be seen if we see any breakout on the pivot level to see higher resistance at 2,177-2,209.
"Volumes in the market are more from intraday trading and no long-term buying is being seen because confidence levels are at an extreme low. Investors sell in the start of the session and cover it off in the closing session. Technically, we are still trading below the neckline and 14-day moving averages and there were no upward breakouts."