The Dubai Financial Market (DFM) faced strong selling pressure yesterday and went down to its important psychological level of 1800 points amid selling in leading active stocks in the real estate and banking sectors.
The DFM index fell by 38.95 points, or 2.12 per cent, and closed at 1800.12 points after all active stocks in the market, including Emaar, DFM, Arabtec, Air Arabia and DIB, retreated.
The market opened in the positive territory and tried to bounce, but turnover was very thin during the first half of trading as the market turned bearish quickly and lost all its gains.
The second half of the session witnessed selling pressures in all leading stocks with speculators cashing out of the market before the announcement of first quarter results, while institutional and high net-worth individuals remained outside.
"We are in a seasonal bearish trend in the DFM, as usually investors stay away during the stage between the announcement of the full year results and the release of first quarter results," said Ziad Dabbas, Financial Consultant at National Bank of Abu Dhabi.
"There is a deep shortage of information and news in the market. There are no significant movers at the current stage and everyone is in a waiting mood, which always leads to low volatility and low trade volumes. The trade values witnessed strong drops this week."
Dabbas said the current selling pressures in leading active stocks came mainly from speculators.
"There are no movers in the market and no expectations of strong movements in leading stocks, so speculators are cashing out and they will remain on the sidelines during the coming few weeks until new movers in the market appear."
Emaar moved in a wide range yesterday, opening in the positive area and advancing to Dh4.01 before it faced strong selling pressure and retreated to Dh3.85.
It was then able to narrow its losses to close at Dh3.88, down by three per cent. The same trend was seen in other active stocks. The DFM stock fell 2.54 per cent to Dh1.92 while Arabtec retreated by 3.4 per cent to Dh2.56. DIB also lost 3.94 per cent to close at Dh2.68 and Emirates NBD declined by 2.28 per cent to Dh3.00.
"We saw pure speculative movements yesterday. Market players pushed prices higher at the beginning of the session so that they could book their profits and exit the market," said Omar Al Kurdi, a trader at Tadawul Shares and Bonds Mediation.
"Selling pressures were high and unjustified in some stocks, such as Emaar and DIB, which are trading far below their fair values. Speculators were selling to stay on the sidelines," he said.
"Some of them used the bearish trend and created more pressure on the stocks to buy again from low levels. This was clear in the rising turnover during the last hour of trading, as some investors were accumulating the stocks from lower levels."
Turnover increased yesterday compared with Tuesday's session, with 226.3 million shares worth Dh513.8 million changing hands.
However, turnover remained 50 per cent lower than the Dh1 billion-level seen during Sunday's session.
Also, trading focused on a few stocks such as Emaar, DFM and Arabtec, which dominated around 65 per cent of the total trade value.
Al Kurdi said he expects selling pressures will drag the DFM index to the 1750-points level. "The index closed at a critical level of 1800 points; it even went below this level during intraday trading.
Tick size system from today
The DFM will apply the three decimal tick size system in the market today, according to a statement.
The system will be applied only on securities with a market value below Dh1. This will allow investors to trade in these securities with fractions of one fils. The market had postponed the implementation of the three decimal tick size system last month in response to requests from brokerage firms, which needed to amend their IT systems and platforms to meet the systems requirements
Research agencies and investment banks have started issuing their estimates for Q1 results of leading active stocks.
Most expectations look positive despite there being wide differences among estimates of earnings in some companies. Shuaa Capital has estimated that Emaar may achieve profits of Dh640.4 million in Q1, while Arabtec may achieve profits of Dh147.7m. Expectations for du reached Dh99m and DSI may announce profits of Dh70m.
Shuaa's expectations for Air Arabia's profits stood at Dh66m and for Aramex at Dh46m.
EFG-Hermes also issued forecasts for Q1 earnings predicting that Emaar may announce Dh381.1m in net profits and Arabtec Dh168.4m, while du may achieve Dh113m.
EFG-Hermes also projected Emirates NBD to earn Dh697m and DIB to earn Dh306m.
"These forecasts vary a lot due to differences in the methods of estimation," said Ziad Dabbas.
"We cannot take these estimates as a reference for investment because research firms cannot collect all relevant data."