Heavyweights feel the force of gravity at DFM
"The DFM is down more than three per cent this year and I don't see an immediate upside with Emaar going sideways – this hasn't helped the index at all," said Mohammed Ali Yasin, Emirates Securities managing director. "There is no good news for a lot of companies and without this we can't expect any positive movement in the market."
The DFM's General Index declined by 1.18 per cent to 5,727 points yesterday after its five largest active stocks fell.
Of these, Emirates NBD was worst hit, losing 2.46 per cent, while Emaar and du dropped 1.72 and 1.65 per cent respectively. The other two – DFM Company and Dubai Islamic Bank fell by just atleast one per cent.
Emaar's decline to Dh11.40 is a two-week low as investors show scant faith in the company despite another broker report claiming it is trading at almost a 50 per cent discount.
Yasin said: "Fundamentally the companies are very strong, but we are not seeing this reflected in the index-moving shares such as Dubai Islamic and Emaar. Other companies such as Arabtec and Air Arabia have been moving up, but this doesn't really affect the overall market." Arabtec did not escape the downturn either as traders booked profits to send it down 3.27 per cent to Dh16.25, its worst one-day reverse since April 29.
Another recent star, Shuaa Capital, also felt the force of gravity, slipping 0.2 per cent to Dh8.37 to take its losses this week to more than three per cent.
Dubai Investments continued to buck the negative trend climbing 0.46 per cent to Dh4.29 as it topped the volume chart for the third day running. It was also the only one among Dubai's five most active stocks to advance, which indicates sellers were strongly in the ascendancy.
Yasin said: "The market remains fundamentally positive. Local speculators are still active and foreign funds are slowly injecting liquidity. We might see a rally as we get closer to the end of June and the announcement of second quarter results."
He is among many analysts who predicted both UAE markets would gain more than 20 per cent this year. He remains positive this can be achieved, despite Dubai being down 3.46 per cent so far in 2008. Abu Dhabi looks on course to meet the above target, having gained 12.6 per cent this year.
"Dubai can still gain 20 per cent this year providing company fundamentals continue to impress, but any major rally is unlikely to start until late September or October," said Yasin. "In the longer term, the DFM should see more gains because it is lagging behind Abu Dhabi," he added.
ADX remains bullish
Buoyant trading on the Abu Dhabi Securities Exchange was in stark contrast to Dubai, with the capital's bourse climbing 0.35 per cent to 5,126 points,
This close is just 0.4 per cent below Thursday's 52-week best as heavy buying in the energy sector propelled the index upwards.
"Abu Dhabi should continue to consolidate its position," said Mohammed Ali Yasin, adding: "I doubt there will be many surprises in the forthcoming second quarter results, although the capital's banking sector looks good.
"The ADX is home to a lot of young, high growth firms such as Waha, Aldar Properties and Aabar Investments and these provide a positive momentum, which should help both markets."
Taqa – known as Abu Dhabi National Energy Company – jumped 4.42 per cent after it approved plans to sell convertible bonds worth Dh4.15 billion. These will be primarily available to Taqa shareholders from Monday and will be converted into shares on September 1, Shuaa Capital reports.
"This is extraordinary – bonds are usually a long-term investments and are held for at least a year until they're converted into shares," said Yasin.
The announcement saw Taqa become the most active stock on the ADX with 94 million shares changing hands, which is nine times its daily average. Yesterday's close of Dh4.02 is Taqa's highest since mid-January.
"The bond will convert at Dh2 per share, so everyone will convert in September – why would you wait when the stock is worth more than double that? It seems Taqa is issuing bonds to avoid launching a rights issue and that's what prompted so much buying yesterday – the potential downside is that the firm's shares will be diluted," said Yasin.
A rights issue sees all new shares issued on a specific date, but a convertible bond allows the firm to release new shares onto the market more gradually, which helps to support its price.
Aabar Investments was also in high demand and it climbed 1.64 per cent to Dh3.73, while Dana Gas completed Abu Dhabi's top traded trio, rising 0.48 per cent to Dh2.08. Etisalat advanced for the first time in five sessions, adding 0.48 per cent, while First Gulf Bank was up 0.76 per cent. National Bank of Abu Dhabi and Abu Dhabi Commercial Bank lost less than one per cent, while Aldar dropped 1.2 per cent.