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Low volumes push ADX to lowest close in 2009

By Matt Smith

The Abu Dhabi Securities Exchange slumped to its lowest close of 2009 after nine of its 10 largest stocks declined amid investors' fears of dire fourth quarter results. Banking and real estate stocks were savaged on desperately low volumes to send the ADX down 2.9 per cent to 2,316 points. In the past four years, it has only closed lower than this on one occasion – December 25 last year.

All five lenders among Abu Dhabi's 10 largest stocks fell.

National Bank of Abu Dhabi, dropped 7.2 per cent to a new two-year low of Dh7.89, while First Gulf Bank and Abu Dhabi Commercial Bank fared even worse to both fall more than 9.3 per cent.

The UAE capital's property stocks also took a battering as Sorouh Real Estate fell 3.75 per cent to Dh2.82 and Aldar Properties plunged 8.12 per cent to a new two-year low of Dh3.17. "Unlike Dubai, Abu Dhabi didn't see much buying at lower levels," said Shiv Prakash, a Mac Sharaf Securities technical analyst.

"The ADX hasn't been able to convincingly break the 2,500 resistance area and yesterday was bad, with continuous selling in Aldar and Sorouh, which have both slipped below critical support levels."

Taqa was another stock to match Aldar's unwanted milestone after falling 4.95 per cent to Dh0.96.

"In a broader sense, the market has probably overshot, but this is a dangerous assumption to make on an individual stock basis," said Robert McKinnon, Al Mal Capital Managing Director of Equity Research.

"The fourth quarter results will offer the first view of the impact of the credit crisis, but it could be that companies will postpone the bad news. Real estate, for example, may not see significant defaults until the first quarter of this year. Investors will be cynical."

Abu Dhabi's performance was better than the headlines figures suggest, with the capital's index preferring to using average, rather than closing prices, and so it should see some bounce tomorrow.

For example, Aldar's average price was Dh3.17, yet its last trade was nine per cent higher at Dh3.45 and the same was true for many of capital's high profile victims.

Turnover hit a 10-week high of Dh420 million, but Arkan accounted for Dh300m of this, while Aldar claimed Dh60m, which means the 29 remaining active stocks shared a turnover of just Dh60m.

Arkan jumped 5.95 per cent to a six month high Dh6.40. The building materials firm has bucked the market's downward trend, despite its fortunes being firmly tied to the beleaguered real estate sector.

Analysts say Arkan's bumper volumes were from high net worth players trying to manipulate the stock and the trading statistics support this view.

Arkan's turnover was achieved through 146 trades, which gives an average of Dh2.1m per trade. Excluding Arkan, the market average was just Dh80,000.

"With institutions staying out of the market, high net worth investors can play with small to medium sized firms such as Arkan and Methaq on a short term perspective," said Sherif Abdul Khalek, Beltone Financial institutional trading manager.