Positive signs from global markets led to a corrective bounce on the Dubai Financial Market (DFM) yesterday, with the index recovering amid renewed buying interest from speculators.

The DFM index gained 14.17 points, or 0.94 per cent, yesterday to close at 1528.40 points. The market opened with a good gap up and added around 25 points within the first few minutes of trading in a positive move. Later it gave up some of its gains but remained in the positive area throughout the session as buying interest helped leading active stocks to maintain most of their early gains until the end of the session.

The market witnessed a corrective bounce after global markets recovered during the weekend, which increased positive sentiment.

"The bounce in the DFM index was expected after the good recovery in global markets during the weekend which also triggered a good rally in Saudi Arabia's stocks on Saturday," said Wadha Al Taha, a senior market analyst.

"Technically, the DFM index gave signs of an impending corrective bounce up at its closing last week when it was trading around its critical support level of 1500 points. This increased expectations of a bounce and led to the gap up at the opening of the session yesterday," he added.

Ehab Rashad, Trading Manager of Direct Broker for Financial Services, agreed that the market behaved according to expectations. "There is deep shortage in local movers and the DFM's trend depends on movements in global markets. Positive closings on US and European markets increased the positive sentiment in local markets and encouraged the return of speculators.

"Also, local stocks reached oversold areas last week and speculators and daily traders were active yesterday in bargain hunting deals. This bounce on the DFM may continue during the coming two sessions but there may be a new wave of profit booking," Rashad said.

Buying interest was seen in leading active stocks including Emaar, Arabtec, DFM and Air Arabia. Emaar was the top active player by value, dominating 49 per cent of the total turnover. The stock advanced to Dh3.21 during intraday trading before closing at Dh3.17, up by 1.9 per cent.

Al Taha said the upside movements in global markets improved the sentiment in local markets. "The recovery in global indices reduced hesitation among investors in local stocks and we witnessed a session of renewed buying interest. However, speculators are in full control and after the DFM index added more than 20 points, we noticed renewed profit-booking. Selling pressures were at low levels but this may increase if the index reaches its resistance area," he said.

Rashad also expected profit-booking to appear if the DFM index advanced to its resistance area of 1560 points. "The market is expected to continue its sideways trend with a tendency for the downside during the coming weeks amid a lack of local movers. The nearest movers will come from second quarter results next month, so the market will continue to depend on external factors in its movements," he said.

Gulfnav ADVANCES 1.3%

Gulfnav advanced 1.3 per cent to Dh0.540 yesterday as the company continued to buy back its shares from the market. Gulfnav bought back 2.34 million shares yesterday. This increased the total shares bought back by the company to about 65 million. The company can buy back an additional 100 million shares as per the approval from the Securities and Commodities Authority.

SHARP JUMP IN DFM TURNOVER

Turnover jumped sharply on the DFM yesterday compared with the previous session as 110.5 million shares worth Dh163.2 million changed hands, compared with Dh72.8m on Thursday.

This remained very low compared with the important level of Dh400m, which analysts see as the critical daily turnover for a recovery in the market. "The market is still suffering from a deep shortage in liquidity despite there being huge cash on the sidelines. There is no clear trend on the DFM at the current stage and investors are waiting for concrete signs of a rally. At the moment, speculators have the upper hand," said Ehab Rashad, Trading Manager of Direct Broker for Financial Services.

Wadha Al Taha, a senior market analyst, blamed institutional investors for the current low turnover. "They are outside the market and even those who are entering are trading with very low cash. Some institutional investors suffered severe losses recently and are trying to compensate some of these through speculation," he said.

Rashad warned that international developments could add more pressure on liquidity in local markets.

"The dollar is appreciating compared with the euro and this will make local stocks expensive for foreign investors, especially from European countries. Even those who are holding positions in local markets may sell to benefit from the appreciation in the dirham's value to cover their losses in European markets," he said.