Sustained selling pressure forced the UAE markets lower on Wednesday, although select buying saved them from deeper declines.
Both UAE exchanges were flat, with the Dubai bourse falling 0.24 per cent to 5,738 points, while the Abu Dhabi Securities Market slipped 0.04 per cent to 4,989.
Trading in Dubai was up by a quarter on the day before, with turnover crossing the Dh1 billion-mark for the first time since Sunday, but this heightened activity could not drag it into positive territory.
"Yesterday was a positive day because I expected a more marked decline in the face of heavy selling," said Mohamed Alami, international desk manager at Naeem Shares and Bonds.
"The closure of margin calls was the driver behind this sell-off, but the buy side was just as strong and so the market didn't take a clear direction."
Most major stocks moved sideways – Emaar and du were unchanged, while the DFM Company added 0.5 per cent.
Investors' faith in Deyaar is waning, with the property developer falling 1.31 per cent to Dh2.25 amid an ongoing criminal investigation into alleged corruption.
This downturn blighted Deyaar's parent company, Dubai Islamic Bank, which dropped 1.26 per cent to Dh9.39. Union Properties also toiled, losing 2.29 per cent.
"Union Properties endured huge selling towards the session close, while for Tamweel it was the opposite as investors tried to buy the stock below Dh8."
After falling through this figure on Sunday, the Dh8-mark is now providing strong support and its current level of demand indicates major interest from institutions.
Arabtec bounced back from its first reverse in four sessions on Tuesday to climb 0.64 per cent, but Shuaa Capital appears to be on the wane, having been one of Dubai's top performers over the past two months.
Shuaa fell 0.62 per cent to Dh7.95, which leaves it down 4.3 per cent on a week ago and 7.5 per cent below March's all time best close of Dh8.59. Alami believes the UAE markets will move up this month, albeit after a slow start.
"The market could see a few red days in the next week or so, but the index should improve significantly in May," he said.
"But volumes are always the key. While these have improved recently from a short term perspective, historically they remain low. I expect trading to rise over time."
Meanwhile, Aldar Properties traded to a standstill, closing unchanged on Dh11.65 despite being the most active stock in cash terms. Rak Properties fell 0.89 per cent, but Sorouh edged up 0.31 per cent. The latter was formerly one of Abu Dhabi's most volatile and active companies, but since April has closed within a 3.5 per cent range. This sideways movement may continue until its 20 per cent foreign ownership limit is amended.
"Aldar and Sorouh both look excellent, especially the former.
"The capital's real estate market is bullish and I wouldn't want to be out of it over the next quarter," said Alami.
"The sector has been consolidating for some time, with the exception of Rak Properties, which witnessed heavy selling pressure yesterday."
Depa in the green
Depa shares stopped the rot yesterday to close in the green for the first time since listing on the Dubai International Finance Exchange. The firm's stock climbed 2.19 per cent to $1.40, despite volumes being barely a third of Tuesday's. DP World also returned to form, climbing 0.96 per cent to $1.05.
Rights issue extended
Dubai Investments has extended the deadline for its rights issue to May 8. The original closing date was yesterday, but the company has now allowed investors an extra week. Existing shareholders will be able to buy up to 858 million new shares at the nominal price of Dh1.
Each shareholder is permitted to apply for up 40 per cent of the number of shares they currently own. Meanwhile, the UAE regulator has approved an application by Dubai National Insurance and Reinsurance Company to allow foreigners to own up to 25 per cent of its shares.
The Abu Dhabi Securities Market added 9.5 per cent in April, while the Dubai Financial Market climbed 7.2 per cent over the same period. These latest gains mean the ADSM is up 9.6 per cent in 2008, but the DFM is toiling in comparison, having fallen 3.3 per cent this year.
A look at the monthly figures shows 2008 has been a topsy-turvy year for both markets. March was the toughest month, with the DFM declining by 10.2 per cent and the ADSM by 5.4 per cent, dashing the hopes of many investors who thought February's resurgence marked the start of a new uptrend.
The February figures were positive for both markets and it remains the only month where Dubai outperformed its domestic rival, climbing 6.1 per cent to Abu Dhabi's 5.4 per cent.
January saw the DFM fall 5.3 per cent, but the capital's bourse added a modest 0.4 per cent. Most analysts predict both UAE exchanges will increase by more than 25 per cent this year, although a downturn on global markets could yet thwart these ambitions.
Wednesday's buying was targeted towards high-growth companies, which shows investors' behaviour is changing, according to Mohamed Alami, international desk manager at Naeem Shares and Bonds. "Fundamentals are playing a huge role in buyers' behaviour – investors are identifying companies with growth potential rather than first-quarter results," he said. Alami highlighted Air Arabia as a stock falling into this category.
Confidence in the airline took a knock after Emirates announced it would soon launch its own low-cost carrier, but a recent research report offering a fair value for Air Arabia of Dh3 has soothed investors' nerves and it appears to now be back in favour.
On Wednesday, it was the most traded stock in Dubai, with 49 million shares changing hands to propel it up two per cent to Dh2.02. "Air Arabia could perform superbly over the next two years, but few local investors take a long-term view – it take patience and research to identify the right stocks to invest in on such a timescale," said Alami.
Institutions are placing large buy orders for the likes of Tamweel, DFM Company, Air Arabia and, with the exception of yesterday, Union Properties. "The orientation of investors is changing – the market is becoming less about speculators moving around small volumes and more about bigger hitters such as foreign and local funds. These are looking for long-term value and are not trying to make, say, five per cent over the next two months."
Looking forward, Alami is bullish on the markets' prospects, saying record oil receipts and diminishing returns in Western markets will drive more institutional money into UAE equities.
"This money will be deployed based on analysis of future earnings, not because of annual dividends. Funds are searching for companies that have more growth potential than might initially appear," he added.
Taqa on top
The Abu Dhabi Securities Market fell for the third day running, despite a stellar performance from Taqa. The latter's shares surged 4.57 per cent to Dh3.40 after announcing a year-on-year 525 per cent hike in first quarter profits. Taqa – also known as Abu Dhabi National Energy – is the seventh largest company listed on the ADSM. While it has increased 64 per cent over the past year – the same gain as the overall Abu Dhabi index – most of this was achieved in May 2007.
Since June last year, it has added 17.9 per cent to the market's 39.5 per cent over the same period. Analysts have tipped Taqa to do very well once revenues from its international acquisitions of 2007 start to reach its balance sheet. Other energy stocks also prospered yesterday, with Dana Gas and Aabar adding one and 1.22 per cent respectively. "Aabar is showing signs of strength after losing 30 per cent of its value over the past two months following the sale of its subsidiary Pearl Energy," said Mohamed Alami, Naeem Shares and Bonds international desk manager. "The energy sector is underperforming compared to banking and real estate, but it offers safer growth, so could be a good bet for investors."