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02 December 2023

Sellers use bounce to cash in on DFM

By Mohamad Al Kady

The Dubai Financial Market (DFM) could not continue its short-lived bounce and retreated yesterday as renewed selling pressures appeared on leading active stocks, especially Emaar and Arabtec.

The DFM index lost 26.57 points, or 1.57 per cent, and closed at 1661.54 points. The index is trading near its short-term support area of 1660 points and if it breaks below this level, the market may go down to its important support of 1600 points.

The DFM opened in positive area yesterday and tried to continue its bounce upwards but sellers appeared quickly and created more pressures in the market. As analysts had predicted, the bounce in the DFM attracted sellers rather than buyers due to weak sentiment among investors. Trading was calm in the beginning of the session, which was when the index moved upwards.

Some active trading was seen during the first half of the session but a mainly calm trend remained as sellers reduced their pressures when leading active stocks went down.

"Confusion and uncertainty is prevailing among investors, and sellers are in control while buyers have disappeared," said Mohamed Al Beheiri, Trading Manager at Tadawul for Shares and Bonds Mediation. "The market is still weak and will move in a descending channel in the near future. There is a deep lack of catalysts or strong news that may help change its direction."

Humam Al Shamaa, financial consultant at Al Fajr Securities, said the confusion among investors came from contradicting news and reports.

"The market received a series of reports and news about expectations in the real estate sector, which is leading the trend in the DFM. There are some positive reports that property prices in Dubai are increasing while there are others predicting new lows in prices this year ranging between 10 per cent and 40 per cent in the worst case scenarios.

"These contradictions among different reports created confusion among investors about the economy and about the outlook in the market, so investors preferred to stay away and wait until more data becomes available about the outlook of the real estate sector," he added.

Turnover declined yesterday, with 162.2 million shares worth Dh283.4 million changing hands. Emaar and Arabtec continued to dominate more than 50 per cent of the total trade value amid deep concentrations in the market.

Emaar and Arabtec also continued to lead the movements in the DFM, as they traded in the positive area at the beginning of the session, pushing the index up to 1698 points. Despite this, the market was unable to test its resistance of 1700 points.

Both stocks reversed their early direction within the first 10 minutes of trading and lost their gains quickly. After jumping to Dh3.47, Emaar went down sharply to Dh3.29 before ending the session at Dh3.32, down by 3.2 per cent. Arabtec also advanced to Dh2.47 and then fell to Dh2.34 before closing at Dh2.35, down by 3.3 per cent.

"Some investors used the bounce in the market to cash out because uncertainty remains about the fourth quarter results. Investors are preferring to stay on the sidelines until earnings of listed companies are clear and they can decide their future investments in the market," one analyst said. "We do not expect any major movements within the coming three weeks until companies disclose their results."

Al Beheiri said Emaar and Arabtec have reached their critical areas and movements in the next two sessions would be critical for the market. "Emaar is moving in a downturn channel and may continue in the downside to its next support area of Dh3.20. Arabtec is trading at its critical level of Dh2.35."

Global correlations to increase

Correlations with global markets may increase in the DFM in the near-term as the market is underperforming greatly compared with global or regional markets, according to Mohamed Al Beheiri.

"The DFM is trading at very low levels compared with other markets in the GCC or other global markets. Most international markets have rebounded sharply from their bottoms, while the DFM is still trading near its bottom. This situation is giving positive indicators that it may attract strong investments amid expectations of a strong rebound in the DFM to catch up with its peers," he said.

"However, the market has not given indications of a strong rebound so far and this is creating more pressure. Foreign investors have been sellers in the DFM since the second week of January and they are reducing their stake in leading active stocks."

Al Beheiri predicted that global markets would face a downside correction in the coming two months and this may affect the sentiment in regional markets. "There is increasing news that major economies in North America, Europe and Asia are planning to reduce their stimulus programmes this year and this is affecting the sentiment in global markets. If there are strong corrections the impact may be severe."


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