Surprise positive earnings may spark rally
UAE stock markets are projected to witness a rally this week on positive results of heavyweights in the real estate and banking sectors.
There is a strong positive sentiment in the market after Emaar, DIB and EmiratesNBD disclosed better-than-expected results, which will encourage investors to inject new liquidity after the markets suffered from extremely low turnovers during the past few weeks.
There is agreement among analysts that earnings of Emaar, DIB and EmiratesNBD represents a surprise for the markets, especially after worries about the performance of the banking and real estate sectors.
"Emaar's results came as a surprise to Dubai Financial Market (DFM) and this will attract investors. We expect renewed buying interest across the board this week," said Ehab Rashad, Trading Manager of Direct Broker for Financial Services.
"The market will focus on local news during the week and the reaction is expected to be very positive."
The DFM moved sideways throughout the week, gaining 12.99 points to close at 1676.20 at the end of the week. The market faced some profit booking early last week but was able to bounce up. The DFM index regained its losses and maintained its critical support area of 1630 points.
"The DFM moved in sideways trend during the second half of the week and, with this performance, we expect the index to test its next resistance level of 1725-1735 points very soon," said Ahmed Hetta, Head of Research at Tadawul Shares and Bonds Mediation.
Foreign investors bought shares worth Dh555.2 million and sold shares worth Dh567m last week.
They were net sellers of shares worth Dh11.8m. Foreign investors also remained active in the market and dominated around 43 per cent of the total turnover. Institutional investors were also net sellers, of shares worth Dh34.9m.
"The impact of global markets will come down sharply and there will be no correlation this week," Rashad said.
Al Fajr Securities said in its weekly review of the market that the DFM index was able to add 0.78 per cent by the end of the week thanks to good cash dividends announced by the banking sector, including Dubai Islamic Bank and EmiratesNBD.
"However, this impact coincided with low turnover, which remains a worry in the market. In fact, the delay in disclosures led market participants to focus on developments in global markets.
Speculators were eyeing development in US stocks while long-term investors remained waiting outside the markets," said Humam Al Shamaa, Financial Consultant at the company.
He said GCC stock markets, in general, have broken the correlation with global markets and have been moving in their own direction for the past six months.
The Abu Dhabi Securities Exchange (ADX) is expected to continue its upward trend in the short term until it tests resistance at around 2780 points. However, the support area remains at around 2700 points.
"The ADX index continued its short-term bounce throughout last week. The market was moving in a steady upward trend with a narrow range at low volatility," Hetta said.
Emaar Properties is expected to lead a rally in the DFM this week after the company posted a net profit of Dh2.3 billion in 2009.
Fourth quarter net profits reached Dh923 million, a 41 per cent increase compared to the third quarter of 2009 and 149 per cent increase compared with the fourth quarter of 2008.
As the results were announced after trading hours on Thursday, the impact on the market will be felt when trading commences today.
Earlier, HC Securities raised its target prices of Emaar Properties to Dh6.6 per shares and maintained its 'buy' recommendation.
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