The Dubai bourse fell back into its bad old ways yesterday as early morning gains gave way to sustained profit taking to leave it languishing in the red. This saw the Dubai Financial Market General Index drop 0.39 per cent to 5,825 points as the top five most-traded stocks all declined.
Gulf Navigation was again the most active stock, claiming 280 million of the 684 million shares that changed hands in Dubai yesterday, as investors cashed in on Monday's mega gain to send it down 3.2 per cent to Dh1.80.
Deyaar was not far behind with 213 million shares traded, but it too fell, dropping 1.15 per cent, while the next three most active stocks – Air Arabia, Amlak and DFM Company – all lost less than one per cent.
Total turnover fell by a quarter, although analysts drew encouragement from the DFM's close above a major prop at 5,800 points and yesterday's performance was in line with the more optimistic expectations for continued sideways movement this week, before giving way to a market advance later in May.
"The market is a little lacklustre at the moment, which is surprising when you consider that first-quarter results have generally been very good and exceeded expectations," said Julian Bruce, EFG-Hermes director of institutional equity sales.
"These results haven't been the catalyst to drive the market up that we were hoping for.
"Volumes have picked up, but one of the main themes in the market is that local investors are keen to take profits, especially after two or three days of gains." Bruce highlighted the recent slump in Tamweel and Amlak as evidence of this trend.
Arabtec has been an exception to this rule, with the construction giant reaching another record close yesterday after climbing 0.62 per cent to Dh16.10. The company was boosted by a huge leap in first-quarter profits. Bruce said: "Arabtec tends to surprise on the upside, although I suspect it will struggle to move up from here because its recent good news has already been priced in by local investors," said Bruce.
"I wouldn't be surprised if it fell back over the next few days."
Bruce is more cautious than many analysts, warning the DFM General Index is likely to remain range-bound for the time being, with investors taking profits along a very slow uptrend.
"For the rest of May it's difficult to forecast any news that might make the market move in a strongly positive way, although the DFM London road show in a couple of weeks, should help raise its profile and there a lot of new funds entering the region," he added.
DP World shares fell 1.87 per cent yesterday as investors booked profits. The company's stock has been improving of late, surging 47 per cent from March 17 to reach a four month high of $1.07 on Monday.
This appears to have been a trigger for a sell-off, although the shares continue to trade in a narrow daily range.
There was better news for Depa, which is recovering following a rocky start to life on the Dubai International Finance Exchange.
The company's shares edged up 0.69 per cent to $1.46 after the company announced it had taken a stake in a Jordanian company to boosts its foreign ambitions.
The Dubai bourse appears to be moving in close correlation to Emaar, with the property developer losing 0.42 per cent yesterday, compared to the index's 0.39 per cent fall. Over the past four weeks, this pair have moved in different directions on only five occasions and two of these were when Emaar closed flat, so despite the huge volumes in small-cap stocks and mega gains in Arabtec, it seems the immediate fate of the Dubai bourse rests with its market leader.
This apparent correlation has not been seen for more than a year, with Emaar underperforming the Dubai index by 24 per cent over the past 12 months. "A lot of this has been because of a number of problems for Emaar in 2007. This left a sour taste in the mouths of investors and unfortunately this has yet to pass," said Julian Bruce, EFG-Hermes director of institutional equity sales. "Emaar used to be the bellwether of the DFM, but it no longer has that status and it's noticeable that the percentage of foreign ownership of its shares has dropped considerably.
"There wasn't bad news in its first-quarter results, so perhaps Emaar has turned a corner and in terms of valuations it should be one of the most attractive stocks in the market."
The Abu Dhabi Securities Exchange struggled, dropping 0.28 per cent to 5,040 points. Turnover fell by more than a third from the day before, mostly down to slackening interest in Arkan, which has claimed the bulk of trading recently. Arkan increased for the seventh session running, this time adding 0.59 per cent to take its total gains since March 17 to 37 per cent.
Abu Dhabi Islamic Bank was the capital's surprise performer, becoming the most-traded stock in cash terms to push it up 2.16 per cent to Dh6.51. ADIB's daily volume of 29.2 million was close to five times its 52-week average, so what was going on?
Well, such an unusually large volume was unlikely to have been sourced from the open market. More likely is that a major stakeholder wanted to sell a block of shares and so arranged the sale outside normal trading. This transaction would then have been completed through the exchange to comply with regulations.
Dana Gas and Aabar both fell following recent gains, dropping 0.94 and 1.62 per cent respectively.
Sorouh and Aldar remained range bound, with the latter unchanged, while the former fell 0.52 per cent.
Other market movers such as etisalat and RAK Properties also lost less than one per cent, so with no momentum in the real estate sector, the ADX is lacking direction, although the importance of the sector on the overall index may be overstated.
For example, etisalat accounts for 36 per cent of the ADX's weighting, while ADIB is 12 per cent. In contrast, the combined weighting of Sorouh and Aldar is 5.5 per cent.
"Abu Dhabi has outperformed Dubai by more than 10 per cent this year, so it may be that Abu Dhabi will plateau, with some GCC investors concentrating on Dubai until it catches up with its domestic counterpart and then both markets will move in tandem again," said Julian Bruce, EFG-Hermes director of institutional equity sales.