Hesitation is expected to continue dominating trade at the Dubai Financial Market (DFM) during the next few sessions and it may last until the beginning of September due to the lack of liquidity in the market.

Analysts predicted that the DFM would continue fluctuating around the psychological support level of 5000 after it closed over this level in the second session, but with limited gains. However, they agreed that the technical support level of the index is still at 4950 points and as long as the DFM closes over this level for the next two weeks, it will increase the potential for a new upward trend after the summer. The index increased by 2.50 points only and closed at 5014.81, with low trading volume of 156.4 million shares at a total value of Dh526.6m.

There was also a consensus among analysts that the UAE markets in general was missing liquidity during the last two months and new liquidity would start entering the markets by the last quarter of the year.

"There is no new liquidity so far in the DFM. It is the same liquidity trading since the beginning of the month, despite leading stocks in the market reached very encouraging and low support levels while results of the companies and the UAE economy in general is performing very well," said Motaz Al Demerdash, CEO of Sharjah Islamic Services.

"Regional stocks markets, in Saudi Arabia, Qatar, Kuwait and Egypt, started strong recoveries this week, but we do not see this trend in the UAE markets, despite prices of stocks stabilising at very low levels," Demerdash said.

"Most people attributed this decline to the summer period, but in fact this summer has been the worst period for the DFM. In the summer of 2005, the index surged sharply and during the last two years, too, there were reasonable levels of liquidity. The current decline in liquidity is very worrying because institutional investors are away from the market for a long time," he said.

He added that institutional investors left the market at the beginning of summer and last week speculators and small investors stayed away, as well. "There is high liquidity outside and most investors are still hesitant to return to the market. This created the current stability in the index and the market will start moving when this liquidity outside starts entering the market again, probably by the last quarter."

Wadhah Al Taha, a senior market analyst, said the current hesitant situation among investors would continue for some sessions. "The same pattern of trading was repeated for the last two sessions, creating a fragile trend in the DFM, which cannot be maintained in the face of any selling pressures and it will cause a breakdown in the current psychological support level.

"What we see is not a solid stability in the market with a low turnover. The average weekly turnover during the first six months of 2008 was around 50 per cent of the average weekly turnover during 2007. The main issue is the silence of big investors who are not activating their portfolios until now and this situation is expected to continue until the second half of Ramadan, when the results of the third quarter start to appear," Taha said.

However, he cited positive indicators among investors, such as the high potential stability in the market at the current levels. "We need to avoid two things during the next two weeks, the first is selling pressures which may take the index to below the level of 4950 points. The second is the high turnover during the downturn trends because low turnover while the index is dropping will make it easier for the market to rebound upward," he said.

Taha also expected that institutional and major investors would start to inject more liquidity into the market by the end of September.

"We expect major investors will start building their portfolios through purchases of leading stocks in the real estate and banking sectors. They will build their new portfolios on four stages during the last quarter of the year."

Meanwhile, an uptrend was witnessed elsewhere in the Gulf. Saudi Arabia's Tadawul All Share Index added 0.3 per cent, rising for a seventh day. The Kuwait Stock Exchange Index fell 0.1 per cent. The Muscat Securities Market 30 Index rose 1.3 per cent to 10,599.73, bringing the six-day surge to 11 per cent. Oman Telecommunications climbed to a two-week high after the country's government shortlisted companies to buy a stake in the telecommunications provider.

 

Foreign investments

Net foreign investments on the DFM reached Dh70.57m as aggregate sell. The market data showed that foreign investors, including GCC and Arab nationals, bought stocks worth Dh154.43m, representing 29.33 per cent of the total purchases. They sold stocks worth Dh 225m, or 42.73 per cent of total sales.

Tabreed most active

Tabreed's stocks topped the most active list by trading volume with 42.2m shares changing hands, representing around 27 per cent of the total trading volume, despite the price appreciating by just two fills to close at Dh2.06. The figure also represents around 30 per cent of the total shares of the company traded since the beginning of the month. However, Tabreed's price has declined by 44 per cent since mid January when it reached Dh3.49, and declined to Dh 1.95 on August 12.