Dubai stocks stabilise and selling pressure weakens

Heavyweights-led trading on the Dubai Financial Market (DFM) towards the end of yesterday's session and helped the general index to close up after it fell sharply during intraday trading. The index added 10.11 points, or 0.52 per cent, to close at 1,953.47 after it slipped by more than two per cent during the session. The increase, though marginal, gave positive indicators and analysts said the DFM could remain stable while global and regional markets continued to face a correction wave. Turnover remained at a low level with 412.7 million shares worth a total of Dh599.3 million changing hands. Analysts said the sharp decline in turnover during the correction in the market was a very positive signal of increasing investor confidence about the outlook for the DFM. The day opened with the same pattern that had been seen in the previous two sessions, trading with some fluctuations in the upside during the first hour before moving into the red for most of the session. Analysts saw this pattern as very negative in terms of investor sentiment as the index could not maintain its upward trend. This worried outside investors who preferred to wait for a clearer direction to emerge in the market before injecting liquidity. This was clear from the sharp decline in trade values during the past two sessions. Another worrying sign was the wide gap in prices between buy and sell deals as some stocks declined by between five and six fils at every deal, while the average movement during the past two months ranged between one and three fils. However, the market changed direction during the last hour of trading due to rallies by heavyweights such as Emaar, which added two per cent to close at Dh3.51. Other heavyweights in the banking sector played a major role, especially ENBD which ended the session at Dh3.70, down by 4.88 per cent. However, DIB changed direction and ended the session 1.15 per cent up at Dh2.63 after losing around three per cent during intraday trading. Analysts agreed that selling pressure weakened significantly yesterday after aggressive selling during the previous few sessions. In addition there was buying by institutional investors and this supported the index. "Selling pressure went down and new liquidity targeting selected stocks appeared in the market yesterday," said Hosam Al Husseini, Head of Brokerage at Emaar Financial Services. "The DFM lost about 200 points in the recent past during a severe correction but this wave is weakening. The index has been hitting a critical area of 1,930 to 1,860 points. This area is very important for both short-term and medium-term trends in the market and any breakdown of the 1,860 point would turn the market bearish. "However, the DFM reached this area after strong losses and it is not expected to break down easily, especially as selling pressures has weakened." A market analyst at EFG Hermes agreed that the index was still in the uptrend and could stabilise above its support areas. "The performance of the DFM is very positive compared to other regional markets," he said. "Heavyweights are taking the lead and this is very positive. Current corrections in prices of heavyweights, such as ENBD and Emaar, are acceptable after their sharp rally during the past few weeks. This is healthy for the market." He said selling pressure had declined sharply while most transactions were focused on low-cap stocks with prices of less than Dh1. "Speculators and daily traders were moving in low-price shares such as UPP, Deyaar, DSI and Gulfnav. These movements had limited impact on the market and the index. Speculators were moving for intraday profits, but leading investors were holding their positions. They are expecting a quick bounce by the index very soon." Husseini said the current stability in the market would encourage short-term traders and investors to return to the market quickly. "Recent selling pressure in the market was technically motivated," he added. "Investors were selling due to expectations of a correction in the market. They were planning to buy back at lower levels and the current stability in prices will encourage them to come back quickly." Active movements Institutional investors have started to take active movements in the DFM and this is expected to deepen trading, said analysts. Hosam Al Husseini said institutional investors had started to move in line with their individual strategies, not in a similar pattern. "We have noticed that some institutional investors have been selling while others were buying based on their own estimates. This is a change in the pattern as they had been taking some kind of coordinated movements in the market. During the past 10 weeks they have been buying or selling at the same time and targeting selected stocks. "This change in institutions' trading patterns is very healthy and reflects real investment strategies." Husseini said the change in trading indicated that some long-term investors were targeting selected stocks at a slow