Speculation drags Dubai bourse down

A profit-taking wave in leading active stocks at the end of yesterday's session dragged the Dubai Financial Market (DFM) down and wiped out all gains seen in the market during the first half of trading.

The DFM expectedly continued its consolidation around its current levels during intraday trading, moving up and down in a narrow range, with price gaps in leading active stocks starting to narrow.

At the end of trading yesterday, the index lost 9.42 points, or 0.51 per cent, to close at 1850.54 points.

The market rallied at the beginning of the session and tried twice to test its resistance level of 1880 points but could not maintain its gains due to quick profit booking movements when prices of leading active stocks advanced. The sentiment changed during half of the session and there were continuous selling pressures on leading active stocks, especially Emaar and Arabtec.

Emaar witnessed sharp fluctuations in prices yesterday and moved between Dh4.17 and Dh4.02 before closing at Dh4.04, down by 0.98 per cent.

Arabtec traded between Dh2.80 and Dh2.68 and ended the session at Dh2.70, losing 1.46 per cent. "The market performance was very positive yesterday despite the downturn during the last hour of trading," said Ehab Rashad, Trading Manager at Direct Broker for Financial Services.

"The DFM is still bullish in the short-term and its target of 1930 points remains intact. Selling pressures at the end of the session cannot reflect the real situation in the market because daily investors who were trading on the margin were closing their positions before the end of trading and this created the selling pressures. Also, gaps in prices of leading active stocks, especially Emaar, Arabtec and the DFM stock, were attractive for speculators who were taking quick movements. This created sharp fluctuations in the DFM index throughout the session."

Rashad said the profit booking movements in the DFM had reached their end and the market would rebound soon.

Turnover advanced yesterday with 429.4 million shares worth Dh1.03 billion changing hands during the session. Emaar, DFM, Arabtec, DIB and DSI stocks remained the top active players. These five stocks attracted 95 per cent of the total trade value in the market.

"Leading active stocks, including Emaar and Arabtec, have not reached their fair values yet and we will see more bullishness in these stocks during the coming weeks until they reach satisfactory levels. Then we can also see movements in other stocks, which have not moved during the recent past. Around five per cent of stocks in the DFM are moving while the rest have remained at low levels. This is because it is leading stocks that appreciate to their fair values first," Rashad said.

The DFM stock was the top gainer in the market, adding 3.13 per cent to close at Dh1.98. The stock hit its new intraday high of the year of Dh2.03 yesterday.

Emaar in the limelight

Emaar moved in a wide range yesterday after Emirates Business' report earlier that the company was planning to roll over around Dh4.5bn of debt maturing this year. The stock closed 0.98 per cent down at Dh4.04 after it rallied to Dh4.17 during intraday trading.

"The news is positive for operations of Emaar, as the company is using an option in its original deals with lenders to extend the maturity of the loans. If the company sees that using this option is cheaper than paying the money and arranging other deals to finance its long-term projects, it will be good for the company. And the market should receive such news in a positive way," said Ehab Rashad.

"However, investors are still sensitive to debt issues and do not carefully study the news and its possible impact on the companies. This situation will take sometime before investors return to making logical assessments of news and rumours in the market."

Salama among top losers

Islamic Arab Insurance Company (Salama) was among the top losers in the market yesterday, after it lost 5.26 per cent to close at Dh0.90 amid strong selling pressures.

The board of directors decided not to distribute any dividends for results in 2009 to enable the company to continue its operations and face future challenges, said a statement. The board also invited shareholders for Salama's annual general meeting to be held on April 28.

There were strong gains in the stock last week amid speculations that the board might recommend cash dividends but its decision was disappointing for speculators in the stock. "Salama faced strong speculations during the past few sessions before the board meeting, based on increasing rumours in the market of a dividend payout," said Ehab Rashad.

Aman retreated 3.23 per cent to Dh0.90 and Takaful-EM slid 2.9 per cent to Dh1.

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