Speculators and foreign funds have deserted the Dubai Financial Market, with few willing to take new positions until a clear trend emerges.
The DFM's General Index added 0.09 per cent to 5,410 points after giving up early gains as short-term trading continues to dominate the market.
Since enjoying its largest one-day gain for six months on July 23, the DFM has remained range bound, falling 0.86 per cent over the six subsequent trading sessions.
"I have read optimistic reports that some analysts see the market hitting 5,600 points this week, but I would like to know what they base this outlook on," said Ayman El Saheb, Darahem Financial Brokerage director of operations.
"At 5,200 I said the market was bottoming out and said it would rally to over 5,400, but sustained selling pressure has forced it down again. We're not in the clear yet and the coming days will be important."
Volumes have slumped: total trading on July 23 and July 24 was worth Dh3.4 billion, while combined turnover from the next five sessions reached just Dh2.7bn.
Yesterday's total was a meagre Dh572 million. "The fact the index is holding steady, despite low volumes is typically a positive sign, because it shows investors are unwilling to sell in large quantities as they believe prices will increase," said Saheb.
With little of note happening, investors are focusing on the penny stocks to try and turn a profit. Air Arabia was the most active stock, claiming 19.8m of the 117m shares that changed hands yesterday, but it fell 0.62 per cent to Dh1.60. It should rebound today, however, after announcing a 39 per cent increase in half-year profits.
Ajman Bank and Gulf Navigation were two other cheapies to make the volume top five, with the former falling 0.62 per cent and the latter gaining 0.59 per cent, which both equate to movements of just one fils in either direction, while troubled Deyaar closed flat. The blue chips had a mixed day, although in truth there was minimal movement either up or down.
Du and Emirates NBD fell 1.2 and 0.84 per cent, while DFM Company and Dubai Islamic Bank each added less than one per cent.
Saheb said: "As an investor I would maintain a wait and see strategy – with such little liquidity, why lock yourself into current prices when the market is offering no indication whether it's going to move up or down?"
Emaar was the most traded stock in cash terms, but it ended unchanged on Dh10.50 after trading in a 2.4 per cent range.
Saheb added: "Emaar closed bearish and the professional speculators will not want to buy at current prices, even though they may be cheap. They would happily buy at higher prices providing there was a strong signal the market was about to move up."
So what would provoke the wholesale return of foreign funds the absent speculators? Well, a clear resolution of Iran's nuclear ambitions would be the most significant factor, but with President Mahmoud Ahmadinejad ignoring another deadline set by the West, there seems little chance of a sudden rapprochement.
Ramadan may prove a positive surprise. Most analysts expect the holy month to see little trading, but last year saw reasonable activity, particularly in Islamic stocks, and the same could happen again this time around.
Market burst
With the market now stagnant, the reason for the market's sudden burst almost a fortnight ago is uncertain.
If it was an attempt by large investors to use targeted buying to spark the market into life and make a quick profit ahead of the conclusion of the second quarter results season, it largely failed.
"If they did come in, then they're in bad shape because have not been able to liquidate their positions and prices have not increased by much," said Ayman El Saheb, Darahem Financial Brokerage director of operations.
GGI jumps 12.2%
Gulf General Investments (GGI) jumped 12.2 per cent, which means it has increased by almost a quarter in just four sessions. The next two largest gainers – Arab Insurance and Al Firdous – claimed a combined volume of just 50,000 shares, but fourth placed Arabtec saw trading worth Dh51m – a total second only to Emaar – to push the construction firm up 1.04 per cent to Dh19.25.
Shuaa Capital was the prime loser, slipping 2.1 per cent to Dh7.05 as June's all time of Dh8.64 becomes an ever more distant memory.
Amlak Finance was another to suffer with investors little impressed by the mortgage provider's upbeat profit forecasts. It fell 1.3 per cent to Dh4.47 and has lost 12 per cent over the past two months. Union Properties failed to advance for the fifth session running, this time falling seven fils to take its losses over this period to 6.5 per cent. It closed on Dh5.29.
Losers outnumbered gainers 12:9, despite the market advancing overall, although it is important to remember that less than half of Dubai's 62 listed stocks are included on the General Index.