Profit booking ends Dubai bourse's forward march

Heavy profit taking hit active stocks on the Dubai Financial Market (DFM) yesterday, dragging the general index down 93.41 points, or 4.51 per cent, to a close of 1979.88.

The index retreated after a nine-day strong rally, having added 19.5 per cent since May 25. The profit booking movement was expected after strong appreciation by stocks such as Emaar, DFM, Shuaa, Deyaar, UPP and Salama, which added in the range of 30 and 60 per cent during the rally.

Profit taking was severe as selling pressure hit most active stocks. The decline came on high turnover as 1.13 billion shares with a total value of Dh1.54 billion changed hands.

Low-cap stocks dominated turnover and Deyaar, Gulfnav, DSI and UPP were the leading active stocks by volume. The same stocks had rallied from last week and faced quick profit booking due to increasing speculation on penny stocks.

The session was highly volatile and the index moved in a wide range of around 130 points. The market opened with a gap up and rallied to test the 2100 level before facing a strong wave of profit booking.

It then moved sideways until the middle of the session when strong selling pressure returned and the index fell to the 1970 level, around five per cent down. However, the DFM managed to reduce its losses slightly by the end of the session.

Emaar opened up and tested the Dh4 level during the first few minutes of trading. The trend changed quickly and the stock faced profit taking pressure for the rest of the session before closing at Dh3.76, down 5.5 per cent. The stock had rallied by 38 per cent during the previous nine sessions.

Heavyweight Emirates NBD tried to hold up the DFM index yesterday. The stock rallied to Dh3.90 and maintained its gains for most of the session before retreating during the last hour to close at Dh3.60.

GGICO was among top gainers as it rallied to Dh2.12 before closing at Dh2.03, adding one per cent. Insider selling in the stock was seen throughout the session. Insider trading in GGICO was also seen on Sunday when the stock was down. There was also insider trading in Aramex, but the insiders were buying at low levels. The stock hit Dh1.28 before declining to close at Dh1.18.

Analysts see the current movements in the market as profit booking rather than a correction. They were cautious about the trend in the market due to strong movements in global markets, which are expected to affect trading in local stocks.

"This is a natural movement of profit booking after the strong appreciation in most of stocks during the past two weeks," said Ahmed Tabbo, a trading manager at Darahem Brokerage.

"The DFM index had added around 350 points since last week and the strong rally that increased volatility in the market.

"Some stocks rallied more than 50 per cent within a few sessions, which opened the way for speculators and daily traders to book quick profits." Tabbo said he expected real estate stocks to face increasing pressure in the coming sessions.

"We expect speculators and short-term investors to continue to book profits during the coming two or three sessions. Real estate stocks, especially Emaar, rallied sharply and will face increasing pressure in the current movements." He stressed that the DFM index was still well above its critical support level of 1890-1900 points.

"If the market breaks this level it will turn bearish," he added. "If it holds above this level we expect the DFM to test the 2100 level again next week."

Tabbo said the profit booking was natural and there was bullishness in the market. "However, we are facing uncertainty about the trend on the DFM in the near future. We expect profit booking will end this week and the picture will be clearer on Thursday."

Humam Al Shamaa, a financial consultant at Al Fajr Securities, said the current profit booking in the UAE markets was in line with global and regional trends.

"Global markets have faced some corrections since last week while the DFM continued its rally. The GCC markets saw profit booking late last week and early this week, especially Kuwaiti stocks. I think this external trend had a strong impact on local markets. The DFM added more than 19 per cent within the past few sessions. This is very strong and the market needs some rest. However, we still see high volatility with sharp ups and downs in the index."

Shamaa said the stocks that benefited from the rally would continue to face profit booking in the short term.


Foreign investors play key role

Foreign investors are still targeting speculation and short-term investment on the DFM, according to analysts.

Ahmed Tabbo said overseas investors were active sellers of the stocks that faced the severest profit booking pressure yesterday.

"We can say the recent new liquidity in the market is hot money which targets quick profit booking," he added. "Selling was strong in real estate stocks which foreign investors were buying during the recent rally."

However foreign investors were net buyers of stocks worth Dh56,06 million yesterday. Foreign investors bought stocks worth Dh589.84m and sold stocks worth Dh533.77m.

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