Surprise local and GCC investments flowing into the Dubai Financial Market yesterday pushed the turnover to its highest level since November 30, with strong buying on selected stocks, especially the DFM and Arabtec.
Trade value jumped to Dh701 million, more than double the Dh311m average value since the beginning of the year. Trade volume also jumped to 590.8 million shares.
The new liquidity entering the DFM was injected by strong high net-worth individual investors from the UAE and GCC countries. Movements by foreign investors were limited, according to analysts. DFM data showed foreign investors bought shares worth Dh49.4m and sold shares worth Dh74.3m, while non-GCC Arab investors, bought shares of Dh178.6m and sold shares worth Dh160.7m. The new liquidity entering the market focused on selected stocks – DFM and Arabtec – as both stocks advanced to almost their upper limits, 14.81 and 12.83 per cent respectively.
The DFM index also closed in its resistance channel of 1,500-1,550 points after it hit this level for three consecutive sessions. The index closed at 1,519.44 points yesterday, adding 27.05 points or 1.81 per cent. The market opened the session down to its intraday support level of 1,455 points, but immediately changed its trend and regained all its losses within the first hour of trading.
The market continued to fluctuate at low turnover in narrow trading up and down throughout most of the session. However, the trend changed dramatically during the last hour with increasing trading on active stocks, especially, again, the DFM and Arabtec stocks.
"There are two main issues in this trend. The first is the new liquidity entering the market from local and GCC investors targeting selected stocks. These investors made strong movements in the market for speculative and short-term investments. It seems high net-worth investors have become active in the market, as they dominated around 50 per cent of the total turnover," said Sherif Abdul Khalek, institutional trading manager at Beltone Financial. "Retail investors were the real movers in the market, while foreign investors were net sellers and the participation of institutional investors was very limited."
He said the other trend is the increasing impact of rumours. "Rumours increased on Arabtec's moves to seal new deals in Saudi Arabia and Qatar. Regardless of the accuracy of these rumours, they created very positive sentiments among retail investors and there was a rush to buy the two stocks, anticipating that they will appreciate in the short term."
Abdul Khalek said most of the active movements on the DFM yesterday came from local retail investors, which were based on rumours after the market started to give some positive indicators that it was searching for a bottom. "The current situation in the market is providing good opportunities for short-term investments. However, the trend is still positive because it reflects the increasing risk appetite among investors for the short term.
"Some stocks have appreciated sharply during the last two weeks and retail investors have realised good gains on profit booking. This situation gave a positive outlook for increasing number of individual investors to benefit from the current market trend. We expect to see more individual investors injecting more liquidity into the market in the short-term. But speculations will continue to dominate, rather than long-term investments.
"There was a similar scenario in the previous downturns on the DFM. The index has been holding in a narrow range during the past two months, giving indications that there is a strong support at 1,400 points and resistance at 1,500 points. The index needs to remain over its resistance level for the next few sessions to give positive indications for a rebound in the short term, which can take the index up to 1,650 points," Abdul Khalek said.
Turnover surges on ADX
The Abu Dhabi Securities Exchange (ADX) ended yesterday's session almost flat at 2203.28 points after adding 2.10 points, or 0.10 per cent.
Turnover advanced, with 132.4 million shares changing hands at a total value of Dh316.1m. Taqa, Dana Gas and Aldar faced strong selling pressures during the session, while Aabar was very bullish.
Aabar's stock attracted investors after the company announced it would convert into shares the first tranche of mandatory convertible bonds issued to International Petroleum Investment Co (Ipic) at Dh1.5bn.
"While Aabar has received the Ipic conversion notice, the new Aabar ordinary shares have not yet been issued. They will be issued to IPIC and listed and quoted on the ADX once the necessary regulatory approvals have been received. We are working with our share registrar, National Bank of Abu Dhabi, on this exercise," Aabar said.
Real estate and energy stocks dominated the market, as Aldar, Aabar and Taqa represented around 35 per cent of the total volume.
The ADX continued its calm and stable trading, moving towards consolidation in the near term. It has support from local institutions, which are building long-term positions. Also, the outlook of certain stocks is positive, which encouraged more investors to turn from speculators into long-term investments.