Sharp fluctuations to dominate trading

Sharp fluctuations are expected to dominate trading at the Dubai Financial Market (DFM) due to mixed signals in the market, despite the short-to-medium term downward trend.

Leading stocks are also expected to continue their pressure on the index this week, which is being considered as the last downturn before the market changes its long-term trend. Realty stocks led by Emaar, as well as the banking sector, are expected to witness further declines. Emaar's stock closed last week at Dh9.39 and needs to create a new support level to stop its expected decline.

The DFM index also broke through its psychological support level of 5,000 points, as well as its technical support level of 4,900.

Analysts expect the current wave to drag the index to its next support level of around 4,600 points.

The increase in turnover during the downturn trend in the past two sessions gave negative indicators for analysts that the selling pressure would continue in the market.

DFM data showed that foreign investors and non-UAE nationals were aggregate sellers in the market to the tune of Dh174.3 million during trading last week. However, net institutional investment reached Dh301.32m during the same period as aggregate buy.

According to Hosam Al Husseini, head of brokerage at Emaar Financial Services, the DFM is already oversold and is giving strong signals that the current sharp corrections will be the last downturn in the short-term before the index formulates its bottom.

Mohamad Al Beheiri, trading manager at Amana Financial Services, said the market has been creating new support levels during the last four weeks and there are a lot of mixed signals that are confusing investors.

"There are local, regional and international factors which are changing the sentiment in the market. For example, the recent investigations into some listed companies has increased the negative sentiment, while the Saudi stock market opened the week with a surprise upward trend, gaining around 3.5 per cent in less than two hours of trading, giving positive signals that the regional markets are recovering. Oil prices and political situations are also playing a role," he said.

Al Beheiri added that these factors would continue to create fluctuations in the DFM index until the market gives clear indicators of its future trend.

At the Abu Dhabi Securities Exchange (ADX), leading stocks such as etisalat and First Gulf Bank are projected to hold the index from declining sharply, despite the long-term downward trend in the market.

Beheiri said realty stocks, especially Aldar and Sorouh, would have a positive impact on the ADX index. "Data shows that foreign ownership in Aldar has reached its maximum limit. This is giving a positive indicator that investors are holding their portfolios in leading stocks and the selling pressure is in its minimal level in the ADX."