Dubai index recovers on bargain buying

The Dubai Financial Market (DFM) witnessed another dreary session yesterday as equities moved in a restricted sideways range following a bleak outlook for the near term.

However, the last 90 minutes of trading saw a quick recovery of the index from its early losses, as Emaar, DFM and Deyaar moved upwards on bargain buying. Speculators preferred to buy the stocks that were available at prices that had turned attractive after continuous falls throughout the day.

Moving in a narrow range of 12 points until 12:30pm, the DFM General Index picked up later to close the session at 1551.19 points, showing a net rise of 0.59 per cent or 9.12 points. In the mixed trading pattern, 13 stocks advanced, 12 fell and two closed flat.

Wadah Al Taha, a senior financial analyst, told Emirates Business: "The market was under pressure initially and later recovered owing to purely speculative trading. The DFM index closed above 1550 points and this is a positive indicator for the market.

"The continuation of short covering and profit booking that began on Tuesday was witnessed in early trading yesterday. The market came under pressure on Tuesday through the covering of short positions, for which margins had been given to speculators during the three sessions of rally. Later on, speculators turned to cheap stocks and started bargain buying that pushed the index up at the closing."

The market recorded Dh178.80 million in trading value and a volume of 160 million shares in 2412 transactions involving 27 stocks. With a combined trading value of Dh150.48m, Emaar, Arabtec, Deyaar, DFM and Aramex accounted for 84.16 per cent of the total turnover on the bourse.

"A medium-term bullishness can be seen only if we manage to close above the neckline resistance of 1630 points. Lower supports are now at 1522 points on the 14-day SMA. Positive divergence on the RSI indicator, with a clear breakout, hints at further corrective recovery until the neckline resistance," said an analyst at MAC Capital Advisors.

The top gainers of the day were Deyaar, Tabreed, UP, GGICO and Dartakaful, while IFA, du, Takaful-Emarat, DIC and Aman were the major losers. Du, which completed its Dh1bn rights issue, fell 3.56 per cent to end at Dh2.170. The bargain buying in the market, though at marginal levels, indicates an undercurrent of positive sentiment for the next rally that may be triggered by news from Dubai World or the second-quarter results.

"Market players are expecting positive agreements between about Dubai World and its creditors. This will create an encouraging environment for buying support. What we need is to keep the momentum until the next trigger hits the market. Dubai World news and second quarter results are going to influence trading. Another positive factor for the market was the drop in provisions for doubtful debts in the banking sector. This means there's no need to accumulate funds for doubtful debt provisions for the banks," said the analyst, requesting anonymity.

"The DFM index maintained above its neckline support levels of 1522 points, showing an undercurrent of bullishness. Emaar remained firm and was holding on to its previous gains, feeding the bullish outlook."

Emaar closed for the day at Dh3.33, up by 1.22 per cent, while the main attraction during the session was in Deyaar, Tabreed and UP shares. Deyaar closed higher by 13.68 per cent at Dh0.349, UPP was up by 5.43 per cent at Dh0.388 and Tabreed gained 7.94 per cent closing at Dh0.367.

Meanwhile, the DFM suspended trading in the NRE stock from 1pm yesterday, ahead of its board meeting.

Deyaar in the limelight

Deyaar's shares on the DFM rose the most ahead of its board meeting scheduled on June 28. The stock surged 13.68 per cent – close to its circuit breaker limit of 15 per cent – and closed at Dh0.349. Deyaar also topped the list of top volume pushers on the bourse with more than 59 million of its shares changing hands, resulting in a trading value of Dh20.11m – the third highest after Emaar and Arabtec.

"While Deyaar moved towards its circuit breaker levels on the exchange, Arabtec was marginally down. The Deyaar stock went up ahead of its board meeting but not enough to push it completely to its circuit breaker limit. I believe there was nothing to influence the stocks much and this was only a shift of trading concentration from one stock to another, depending upon their values. Basically, lower prices attracted more buying in Deyaar," said Wadah Al Taha.

Less institutional activity

Foreign investors, banks and institutions turned out to be net sellers on the exchange yesterday in the absence of any major catalyst to drive the market upwards.

Foreign investors sold shares worth Dh78.42m and bought shares worth Dh58.74m, resulting in net selling of Dh19.68m.

Institutional investors seem to be on the sidelines as the total institutional net selling stood at Dh29.98m only.