All the 25 stocks traded on Dubai Financial Markets declined yesterday. The DFM index fell 1.48 per cent to end at 5,427.46. In contrast Abu Dhabi Exchange rose 0.14 per cent to 5,087.96.
Small and new stocks dominated trading in DFM and ADX signalling the prevailing speculations and uncertainty among investors.
Trading value dropped sharply on DFM to Dh854.8 million in yesterday's session compared to Dh2.17bn on Thursday. ADX attracted trading worth Dh2.52bn yesterday, compared to Dh 1.58bn on Thursday.
Declining foreign institutional investments, negative sentiments in international markets and the sharp drops in emerging markets also created an overall downturn in UAE stock markets, which is expected to continue throughout summer months.
Despite analysts insisting foreign investments are increasing in local stock markets, Arab and non-Arab institutional investments reached Dh870m as aggregate sell last week. Yesterday's session also witnessed more institutional investors reducing their portfolios on Dubai Financial Market.
Fadi Al Saeed, head of equity at ING Investment Management Middle East, attributed the current downturn trend in the UAE markets to the decline in global emerging markets last week. "Also international banks are expected to announce further write-offs and institutional investors are becoming more worried about major losses in international markets."
Mohamad Al Beheiri, head of trading at Amana Financial Services, highlighted economic and political factors, which are pushing institutional investors to reduce their investments in local markets. "The continued decline in dollar and dirham value made gains in local markets unprofitable for foreign investments. Also the rising geo-political tensions added to the negative sentiment among investors."
Motaz Al Demerdash, CEO of Sharjah Islamic Services, agreed that increasing numbers of institutional investors were freezing their investments due to lack of strong incentives. "Part of the current decline on DFM is because of trading on selected and new stocks such as Ajman Bank and Ekttitab. Profit-taking was clear in trading on Ajman Bank yesterday after the stock achieved gains of more than 40 per cent during the previous two sessions. We expect the same will take place on Ekttitab stock during the next few days," said Demerdash.
He said Emaar stock was approaching a critical support level of Dh10.51. "If the DFM continues the downward trend and Emaar stock goes through this support level, it may continue the downturn to reach the Dh9.75 level. The DFM stock closed at Dh4.99, which may lead to further losses, especially as the trading volume during the second quarter was not high. There are moderate sentiment about the DFM results," he said.
Demerdash also highlighted pressure of the stock of Air Arabia, which reached Dh1.80, and he predicted the stock might decline to Dh1.70.