Continued selling pressure on the Dubai Financial Market (DFM) yesterday dragged the index down 2.70 per cent to 1,490.02 points.
It was for the sixth consecutive day the market fell. Of the 25 scrips traded, only two – NCC and CBD – closed higher, while 20 stocks closed lower against their previous levels. Trading volume was up at Dh382.44 million against Dh366.8m in the previous session, while about 312.58 million shares changed hands in 6,666 trades. DFM, ARTC, Emaar, DIB and DIC were the main volume pushers in the market.
If the DFM index remains below the 1,501 points level then there will be a likely support at 1,469-1,449 points, according to analysts that Emirates Business spoke to. The market may seem some bullishness only if a breakout occurs on the pivot levels until the 1,521-1,553 resistance level, they added.
DFM Company, which announced results on Monday, slid 6.8 per cent to Dh1.09. Despite its announcement of cash dividends of eight per cent, the stock came under pressure. Market observes said since the dividend announcement had already been factored in, the DFM stock saw selling pressure.
"There was buying interest in the DFM stock on expectations of a possible dividend announcement. Hence, the market discounted it by the time it was officially announced, Moreover, the lack of dividend announcements by other companies also weakened the market sentiment," said Vyas Jayabhanu, Head of Al Dhafra Financial Services.
Shiv Prakash, Technical Analyst at MAC Capital, said: "The DFM stock broke through its support level of Dh1.15 and fell by 6.80 per cent to close at Dh1.08."
There was also anticipation among investors that two property companies would merge following the adverse conditions in the property market. As news of a possible merger spread in the market, Union Properties, which led the losers, fell 9.1 per cent to Dh0.60, and Deyaar Development also slipped 4.1 per cent to Dh0.47.
The chief financial officer of Union Properties had said on Monday that the company would sell its stake in Emirates District Cooling Company to raise cash for its 2009 funding needs of Dh2.5 billion.
"Lots of companies are talking about mergers because in the present adverse conditions, particularly realty firms, are unable to carry on their operations. They are looking at possible mergers or financial packages, which can bail them out from the crisis. Big developers are no exception to this. They are also looking for support for their existing activities. As a result of this, sentiment has been weakened," said Jayabhanu.
The market could not hold on its support areas and gave a break on the supports of 1,530, which went lower by 2.70 per cent. ARTC's stock continued to sell and fell by 7.38 per cent to close at Dh1.38.
"Despite a good retail appetite, global cues have impacted the trading sentiment today. The market situation in the United States and the United Kingdom is very bad. Particularly, the Dow Jones index slipping to a 12-year low has dampened the sentiment. Otherwise, there was a positive uptrend on the DFM without the support of foreign investors," said Mohamed Galal, Head of Foreign Institutional Sales, Al Futtaim Securities.
"However, I consider that retail investors and regional funds are the main drivers of the market. Foreign investors are selling, but not significantly," he added.
Fluctuating widely during the past three months, the DFM has been volatile with speculators entering and booking profits at every opportunity. Banks, insurance, investment, realty, transportation and other utility sectors hit lower levels in the absence of buying interest in these stocks. The top losers of the day were UPP, ARTC, DFM, IAIC and Salam Bah, while trading toppers were DFM, ARTC, Emaar, DIB and Air Arabia.
DFM has suspended trading in Salam shares ahead of the company's AGM and EGM to be held soon.
Mathew Wakeman, Managing Director, Cash and Equity Linked Trading, EFG Hermes, said: "There were no surprises today with buyers happy to sit lower and wait for the sellers to come to them. Dubai failed to defend the 1,500 level and feels adrift this week in the absence of any market-moving news. Rumours that are fast becoming stale are no longer able to provide support and spark speculative interest."
The DFM index, which opened at 1,520, failed to hold on to early session strength after the DFM stock came under selling pressure following its result announcement.
"The market had priced in results of this kind, however, so further weakness should prompt buying interest," said Wakeman.
Dubai Islamic Bank closed flat, holding onto yesterday's gains. Demand for the stock is underpinned by speculation about unrelated M&A activity at its subsidiaries Deyaar and Tamweel.
Outlook still positive
In its undercurrents the market is still positive about the outlook of Dubai, as the government's measures are expected to strengthen the economy in weathering the global economic slowdown.
"The market is likely to stage a rebound as current activity is more of speculative transactions. Moreover, most of the funds and major retail investors are trading on short-term outlooks ," said an analyst.
The quarterly results season is likely to result in more speculative deals in the near-term. Lack of long-term positions will weaken market.