The bears were proved correct Monday as diminishing volumes sank the UAE markets.
The Dubai Financial Market General Index was worst hit, falling 1.22 per cent to 5,715 points to more than wipe out Sunday's gains, while the Abu Dhabi Securities Market fell through a psychologically important barrier to end on 4,998 points, down 0.41 per cent.
"Investors are wary after the gains of the past week or so," said dealing Sherif Abdul Khalek, room manager at Al Futtaim HC Securities. "The feedback from traders is that they believe the market is moving in the right direction and is building up for a new uptrend after two to three days' consolidation."
In the fortnight to Sunday, the Dubai index surged 6.3 per cent, while the ADSM increased by 3.4 per cent over the same period, so most brokers welcome a pause to stop the markets overheating.
The DFMGI's turnover fell by half from Sunday's figure to 937 million yesterday. This is the first time in more than a week that trading has dropped below Dh1 billion, while the ADSM failed to make any headway despite volumes improving on the day before.
Dubai's top five traded shares all fell, indicating that sellers were in the ascendancy. Of these, Emaar was worst hit, plunging 2.52 per cent to Dh11.60 to drag the rest of the index down with it. The decline in Dubai's market leader may have surprised many after Emaar appeared to be building a solid base above the Dh11.70 level. The DFM Company was another of this active quintet to suffer, slipping 1.31 per cent, while the others – Deyaar, Gulf Navigation and Air Arabia all lost between one and two per cent. Khalek blames the slump in volumes on two factors: month-end margin closing and a measured caution from institutions. "Normally the margin calls don't affect the market until the final two day's trading of the month, so it has hit a little earlier this time, while funds and big-time players are also watching on the sidelines, rather than getting involved.
"They have set price targets for particular stocks and so are happy to wait and see if these rise rather than buying immediately."
The UAE's mortgage sector was also hit hard, with Amlak Finance and Tamweel declining 3.65 and 2.38 per cent respectively.
Shuaa Capital, one the of the market's stars over the past two months, also struggled to hold its ground, slipping 2.06 per cent to Dh8.05, its lowest close since April 16.
Meanwhile, Abu Dhabi equities enjoyed a mixed performance, with the top-traded Arkan Building Materials climbing 1.28 per cent to a new record high of Dh4.73, while the next three most active stocks all fell. The declines of this trio – Dana Gas, Sourouh Real Estate and Aldar Properties – offer further evidence that investors are booking profits following recent gains. Aldar tumbled 3.35 per cent to Dh11.60.
"Once May comes, investors will show more confidence and I expect Dubai to challenge 6,000 points within the next two weeks, while Abu Dhabi should be able to break 5,000," said Khalek.
Further forward, he expects Abu Dhabi to increase by between three and five per cent by the end of next month, which should place it somewhere between 5,150 and 5,250 points.
Value for investors
The Abu Dhabi Securities Market is the third cheapest stock exchange in the Gulf by price-to-earnings ratio, according to data from Zawya.com. This shows the Bahrain and Kuwait exchanges broadly offer the best value with respective PE ratios of 11.8 and 12.7, followed by Abu Dhabi's 15.8. Dubai's score of 17.8 sees it languish in fifth place, also behind Muscat's PE of 16.7.
Saudi Arabia and Qatar bring up the rear, with PE ratios of 18.6 and 20.1 respectively. The Gulf average is 16.7. "The UAE and Saudi are more liquid markets and so it's normal for them to be trading at a higher PE ratio than the likes of Bahrain," said Sherif Abdul Khalek, dealing room manager at Al Futtaim HC Securities.
"Saudi Arabia may be a little overpriced and should come down a bit, but I don't think it would ever see PE levels of 12 to 15. "Many broker reports are very bullish about Kuwait," he added. Depa falls Depa shares took another tumble yesterday as investors cashed in on their stakes. The interiors contractor fell 5.37 per cent to $1.41 and has now lost nine per cent since listing on the Dubai International Finance Exchange last Wednesday.
Many analysts had warned the company's shares had been priced too high – the same criticism that was levelled against DP World when it listed in November – and it seems Depa is following the same pattern as its predecessor. Volumes have slumped along with the company's share price, from a high of 18.7 million shares on its debut day to just 261,410 on Friday.
While the latter can largely be blamed on the fact Friday is a holiday and the two domestic UAE markets are closed, yesterday's volume of 3.15 million is barely a sixth of that of its opening day.
Meanwhile, DP World fell 0.94 per cent to $1.05, with 11.8 million shares traded. It has jumped 22 per cent since April 11, but remains 19 per cent below its initial public offering price of $1.30.