Stock faces crucial session to decide DFM trends

The Dubai Financial Market is facing a critical session today after it formed a doji – a point where bulls and bears are in equilibrium – near its resistance level around 1,650 points, say analysts. Today's session should decide the short-term trend. The index will either reverse its direction to the downturn or resume its upward trend to the next strong resistance around 1,800 to 1,850 points. The DFM closed almost flat yesterday after losing 1.72 points, or 0.10 per cent, to end at 1,654.53 points. The market faced quick profit booking at the beginning of the session and lost around 20 points before buying returned on selected stocks, which helped it to regain most of its losses. The fluctuations in the market came on declining turnover as 463.5 million shares changed hands at a total value of Dh589 million – down 40 per cent compared with the turnover during the previous session. DFM stock faced strong selling pressure, slipping 4.13 per cent to close at Dh1.39. Emaar also continued to face pressure and declined 1.6 per cent to Dh2.44. Yesterday's session was considered a vital one to maintain the upward trend of the market to its next resistance at 1,800 points. The index failed to confirm its upward movement and turned trendless, reflecting uncertainty among investors. However, analysts said the DFM was giving positive indicators that it would be able to continue the upward trend in the short term. "The fluctuations in the market yesterday were due to the lack of strong positive news and the closure of global markets because of the Easter holidays," said Fadi Al Said, Head of Equities at ING Investment Management Middle East. "There is a cautious sentiment among investors regarding the trend in global markets. We saw that local markets were moving in the upward trend, backed by the positive trend in global markets. There is increasing speculation on selected stocks prior to the announcement of first quarter results. There are expectations that listed companies will report strong figures. Also, some investors are rotating their portfolios and this has created fluctuations in the market." Al Said said he expected the DFM to continue on the upward trend in the short term due to changes in sentiment regarding some stocks. "There are accumulations on selected stocks and this will push the DFM index higher in the short term. "There is limited liquidity coming to the market but it is not clear whether it is targeting long or short-term investments. Also, institutional investors are targeting Tier One emerging markets. This is clear from strong rallies in markets such as China, Brazil and Egypt. We expect that they will start to target frontier emerging markets, including the UAE, at a later stage." Ahmed Tabbo, a financial analyst at Darahem Brokerage, agreed that today's session would be a crossroads for the DFM's trend. "However, we expect to see a strong tendency to the upward trend as the index managed to close above its critical level of 1,650 points. There is accumulation of some stocks such as Arabtec and DSI. Arabtec hit a new high yesterday and looks bullish with a target of Dh2.40." However, Tabbo voiced concern about increasing speculation on some stocks and the current negative impact of Emaar on the index. Emaar was expected to hit Dh2.70 at the beginning of the week but negative news about the stock narrowed the index's bounce and Emaar will have the upper hand in deciding the market's trend. It should remain around Dh2.50 to ensure the upward trend." Appetite for riskier stocks increases The main theme on the DFM is the increasing appetite for riskier shares as investors start to rotate part of their portfolios from defensive stocks to more aggressive ones. Fadi Al Said cited the increasing risk appetite among investors, especially regarding banking stocks. "The risk appetite regarding banking stocks is improving due to several factors," he said. "There are high expectations that local banks may achieve strong results during the first quarter. There are expectations that provisions in banks will be less than expected and this will reflect positively on bank profits." "There is increasing news and reports from different rating agencies which show that banking stocks in the UAE markets are aggressively oversold, with some even below their book value. Also, news that the Dubai Government will start to allocate the proceeds of its bond programme soon have improved the sentiment regarding risky stocks in the banking and real estate sectors." He said the prices of risky stocks, including banking and real estate ones, would start to their real value. "We have noticed that the prices of some banking stocks moved strongly during the past few sessions as they were adjusting their prices to the new developments. Investors started to accumulate these stocks and there is a strong buying trend on some banking stocks." He expected the movements would continue until the announcement of Q1 results. Keep up w