Selling pressure on leading stocks drags ADX down - Emirates24|7

Selling pressure on leading stocks drags ADX down

Selling pressure on leading stocks at the Abu Dhabi Securities Exchange dragged the index down 29.76 points, or 1.32 per cent, yesterday to close at 2,226.09, well below its resistance channel at 2,300.

This suggests the rebound in the market is over, though the index is receiving support at the level of 2,170 points.

The ADX shared the same bearish trend as the DFM. Turnover was very low after 50.4 million shares changed hands at a total value of Dh 86.5 million.

Sorouh and Aldar led the active losers on the market, with Sorouh retreating 6.25 per cent to Dh2.61 on strong selling pressure. This came after it fell 3.7 per cent last Thursday after reporting a fourth-quarter net profit of Dh 4m, a 90 per cent fall compared with the same period in 2007. Aldar fell by 4.31 per cent to close at Dh 2.33.

A shortage of liquidity and speculation along with the lack of news continued to dominate the market. The ADX, like the DFM, is suffering from short-term movements by investors who are booking profits at very limited margins.

"Speculation will continue in the short-term," said Abdul Hakim Jamil, trading manager at Borouj Securities and Bonds. "Even though 2008 results are positive compared with the performance of the world economy, investors' confidence is still at its lowest level and the reaction to these results was negative."

"The movements in leading stocks including Etisalat, Sorouh and Aldar will continue to decide the trend of the ADX. The current speculative movements in these stocks will lead to more fluctuations in the index even though the general trend is still bearish."

However, he predicted the UAE markets would soon reach their bottom channel and sideways movement would continue for some time before prices consolidated around the current level. "The prices of most stocks have reached very low levels and they are moving up and down around these levels. This indicates the bottom in the markets will be seen in the near term."

Jamil also said the shortage of liquidity was a major factor fuelling speculation in the markets. "Despite prices reaching very attractive levels, investors cannot access liquidity to buy because bank credit is nearly blocked. There are many constrains that are preventing more liquidity from entering the markets at the current stage."

However, Jamil said he expected GCC indexes to rise as the world's most active emerging markets in the near future.

"The global crisis has revealed strong economic fundamentals in the region. The current deterioration in the regional market reflects overreaction and negative sentiment among investors."



Dana Gas ends flat

Dana Gas ended the session flat at Dh0.55 despite strong turnover on the stock after 9.3 million shares changed hands.

The stock advanced at the beginning of the session to Dh0.57 after the company announced that its full-year net profits rose eight per cent to Dh120m in 2008.

Dana Gas said its cash reserves and bank balance stood at Dh789m and stressed that it had a strong cash flow. However, the stock could not maintain the upward trend and retreated by the end of the session under pressure pressure from profit-booking movements.

 

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