Sideways trading amid low turnover is expected to continue in the Dubai Financial Market (DFM) with major individual and institutional investors sitting outside the market in wait and watch mode.
Yesterday, the DFM recorded its lowest turnover so far in 2010, moving in a narrow range at the beginning of the week's trading due to the deep lack of movers. The index went down by a small 2.06 points, or 0.13 per cent, to close at 1623.93 points.
All leading active stocks, including heavyweights, moved in narrow fluctuations of around 2fils up or down, a situation that even speculators and daily traders could not change in the market yesterday.
On the lowest turnover day of the year so far, 76.3 million shares worth Dh99.5 million changing hands.
Emaar remained the top active stock with less than 10 million shares changing hands, and the stock advanced slightly to close at Dh3.04. There was low trading on the stock throughout the session and most of the volume on Emaar came during the second half of the session. Other real estate and construction stocks faced selling pressures during the session with Arabtec, DSI and UPP ending the session in the negative area.
Air Arabia was leading the DFM at the beginning of the session with some buying interest, after the company announced positive results and international reports showed a very positive outlook for low-cost carriers. However, this bullish trend waned quickly and the stock ended the session flat at Dh0.98.
Expectations are high among analysts that the DFM may continue the sideways trend in the near future due to a lack of movers after most listed companies announced their 2009 results.
"Most major investors are outside the market and we do not expect their return in the near future. They prefer to stay on the sidelines waiting for a clear direction in the DFM," said Fadi Al Said, head of Mena Equities at ING Investment.
"Foreign investors are also outside the market and are shifting their investments to other bourses in the GCC and the Middle East where there are expectations of good moves in prices.
"The 2009 results were very positive, especially in leading stocks such as Emaar. However, controversial news and rumours in the market hurt the sentiment just when the DFM was taking the right track. Despite the Dubai Government denying rumours on the restructuring of Dubai World, the market could not regain its momentum."
Ehab Rashad, Trading Manager of Direct Broker for Financial Services, said small retail traders and speculators are in full control of the DFM at present and investing with low liquidity. "We need strong positive news to push forward trading in the market. Investors are away while prices are moving in very limited ranges.
"This situation has pushed out different types of investors and only small speculators, who are targeting very limited profits of around 2fils, are the ones left in the trading. However, this situation is harming all market participants," he said.
Rashad expects the DFM index to continue fluctuating in a narrow range between the support area of 1600 points and resistance area of 1670 points in the near future.
Gulf Navigation on insider traders'list
Gulf Navigation was the only stock seen on the insider traders' list as the company continued it buyback programme.
It bought back around 5.2 million shares yesterday in the range of Dh0.58/0.59.
The stock also turned out to be among the top active stocks and ended the session in the positive area at Dh0.59, adding 1.72 per cent.
The company said in a statement on the DFM that it bought back 1.98 million shares on Thursday, representing 0.12 per cent of the company's capital. The company can buy back an additional 158.5 million, according to the approval from the Securities and Commodities Authority.
Ehab Rashad said movements in the Gulfnav stock reflected the negative sentiment in the market. "Gulfnav was buying its shares during the past two sessions but the market ignored this signal.
"The stock moved up slightly but we did not see buying interest in it from investors. In fact, most of the turnover in Gulfnav came from the company itself. This reflects the very low buying interest in the DFM."
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