The Dubai Financial Market (DFM) closed almost flat yesterday after a mixed session that saw strong fluctuations.
The index faced two waves of selling pressure followed by a buying trend on selected stocks, which created the sharp fluctuations.
DFM opened with a gap down of 1.8 per cent before rallying by about 40 points. The index then fell sharply again to 1,642 points and by midday it had plunged under strong selling pressure. It lost more than two per cent before narrowing its losses to close at 1,661.31, down by 5.21 points or 0.31 per cent. The market faced strong fluctuations throughout the session on declining turnover as 418.9 million shares with a total value of Dh587.7 million changed hands. The index followed the directions of leading active stocks, especially real estate giants Emaar, Arabtec, Deyaar and Union Properties.
Arabtec dragged the index down from the first moment of trading, with deals of about 10 million shares taking place within the first 15 minutes. This was a continuation of the selling pressure on the stock that began at the end of the previous session. Arabtec opened down at Dh2.05 and went up to Dh2.22 before again hitting its intraday support level of Dh2.05. The stock continued to fluctuate until the end of the session to close at Dh2.15, down by 1.82 per cent.
Emaar opened down at Dh2.46 before recovering sharply to Dh2.58. The stock then moved down again to Dh2.45 before recovering to close flat at Dh2.54.
Union Properties fluctuated sharply after the company said it would issue 10 per cent bonus shares to shareholders whose names appear in the share register on April 30. The stock closed 1.14 per cent up at Dh0.88 after falling to Dh0.84 during intraday trading.
DFM stock fluctuated between Dh1.30 and Dh1.37 before closing down at Dh1.34. DSI opened down to Dh0.73 but recovered its losses quickly and ended the session 2.66 per cent up at Dh0.77.
Analysts said the uncertainty among investors that led to the sharp fluctuations was caused by global and regional factors rather than domestic concerns.
"There was a strong positive impact on investor sentiment at the beginning of the week from statements by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, regarding Dubai's economy," said Abdul Hakim Jamil, Trading Manager at Borouj Stocks and Bonds. "However the weakness in global and regional markets, especially in the US and Saudi Arabia, reversed the sentiment and created uncertainty."
He said yesterday's sharp decline in the Saudi market after Sabic announced unexpected losses had led to worries among investors in the UAE markets.
"The impact of losses by Sabic was very negative among investors and there were worries about the forthcoming results of leading companies listed on DFM," Jamil said. "There was strong selling pressure on some stocks as investors preferred to liquidate their portfolios prior to the announcement of the first quarter results during the coming weeks." However, Jamil said changes in investors' movements provided satisfactory indicators for the market.
"Since the beginning of the month investors have been taking riskier movements for a longer time than they were during the first quarter. The current profit-booking movements came after a long rally on DFM during the first two weeks of the month."
"Investors used to book profits within two or three sessions at very low levels ranging between two and five fils. Now sentiment has changed and investors are taking longer to pocket their profits and are targeting between 20 and 30 fils per share."
Humam Al Shamaa, a financial consultant at Al Fajr Securities, said the UAE markets and their GCC peers had correlated fully with movements in global markets since the beginning of the month. "After the G20 summit and positive news about the results of some US companies there was a wave of optimism in global markets and we saw DFM advancing as a result during the first two weeks of April," he said. "This week witnessed negative indicators about the EU economy and high provisions in Bank of America, which reversed the sentiment in the US, Asian and then the GCC markets.
"The DFM index maintained its levels yesterday due to the leading role Emaar played in supporting it. The stock did not rally sharply during the upward trend and selling pressure ended early so it closed flat."
UAE markets to follow global trend
Prospects for the UAE markets today are expected to depend on the performance of the US and Asian markets as the profit-booking wave ended yesterday, according to Humam Al Shamaa, a financial consultant at Al Fajr Securities.
He predicted that full correlation with global markets would continue in the short term and movements in local markets would depend on sentiment around the world. "There are no deep changes in domestic fundamentals," he added. "If the US and Asian markets start to recover we expect local markets to advance. However, if the global markets continue down we expect a period of fluctuations in local markets that will open the way for sharp speculations in the short term."
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