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01 October 2023

Index dips after gains in past two sessions

By Sreenivasa Rao Dasari

The roller coaster movement on the Dubai Financial Market (DFM) continued as the index declined marginally after two sessions of equally marginal gains last week.

Banking and realty stocks pared previous gains pushing the index lower by 0.59 per cent to 1589.97 points, a net loss of 9.46 points from the previous close of 1599.43 points. Analysts said the market was losing direction for want of a clear signal, either from global trends or regional developments.

Barring telecom and transport sectors, all the sub-indices closed lower as banks and utilities were the worst hit followed by insurance, finance/investment and realty stocks. The market so far has not received any major push, said analysts.

"We have seen signals or signs that either market is ignoring or moving opposite direction to key factors such as fourth quarter results. The market is losing direction," said Wadah Al Taha, Senior Financial Analyst.

"Markets held their ground pretty well [yesterday] given the volatility we have seen in recent weeks. Bad news is priced in and more at these levels and so we now need some positive catalysts to justify a move higher," said Mathew Wakeman, Managing Director for Cash and Equity-linked Trading at EFG-Hermes.

"After one month of trading into the new year, only a few companies have announced their results for the fourth quarter. Most of the leading companies are hesitant to announce results and this does not reflect the positive sentiment," said Al Taha.

Market heavyweight Emaar eased 0.65 per cent and closed at Dh3.07 as the stock clocked the day's highest trading turnover of Dh84.54 million and second highest volume of 27.92 million shares. "Hopefully, Emaar will provide its earnings this week. Any orderly restructuring of the debt will also be the spark we need to kick start the year, conversely any hiccups here will keep us at these levels for some time," said Wakeman.

Aramex shares were in limelight in the early trade as the company surpassed earnings forecast for the fourth quarter results. The logistics major announced 28 per cent rise in the net profit for the third quarter. Aramex shares added 1.23 per cent and closed at Dh1.64.

"Moreover, the results announced so far had very limited impact on the trading. For instance, Aramex has done very well, but the stock price couldn't soar as it supposed to be," said Al Taha.

The DFM index moved in a very limited range of 22 points throughout the session and touched day's high of 1598.33 points and low of 1576.58 points in the first half of trading. Experts rule out the chances that thin volume may result in further rise.

"I don't think so. At this level, investors and institutions including foreign investors are not active. If you buy, you can't sell. Which means, one can't buy and sell quickly in the present trading pattern," said Al Taha.

Taking cues from the US and Saudi markets, trading took off on a weak note yesterday. The US markets were closed the previous week lower, while Saturday's trading on Saudi reflected weaker market sentiment following the drop in oil prices. Oil prices fell to $72.9 per barrel on Friday.

DFM stock slipped into pressure following the cut in price target by Goldman Sachs. The DFM shares closed lower 1.90 per cent and closed at Dh1.55.

Market players were anticipating retreat in stocks movement as they were expecting a correction on the Chinese market. The major reason for this was expectation of weak demand for petrochemicals following the projected slow down in the growth of the dragon country economy.

Despite the $193m contract, Arabtec shares traded lower as investors were not too upbeat over the new contract to build P17 Tower on Sheikh Zayed road. Arabtec shares fell 0.88 per cent and closed at Dh2.25.

The first half trading saw only Dh130m worth of transactions as 89.90 million shares changed hands.

The US effect

The weekend sell-off on the US markets, Saturday's drop on Saudi market and drop in oil prices influenced the market sentiment yesterday.

"Correlation with the US markets is coming back on local bourses. We have established new correlation pattern for the US. From March, 2009 onwards, the US index recovered and is braced to surpass the psychological barrier soon, said Wadah Al Taha.

"The market may move in tandem with global markets as its correlation with the US markets is likely to continue for limited period. The recovery in the major economies will be delayed as it will take longer time to give a push to the bourses."

Reflecting the bleak trading sentiment on the bourse, DFM recorded Dh209m trading turnover yesterday as more than 147 million shares changed hands over 3,188 transactions in 30 stocks. "Market is still weak as the trading value was hovering below Dh210m. Key factors such as lack of confidence and hesitation are looming over the market," saidf Al Taha.


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