The stock markets in the UAE are projected to witness a relative calm this week, with mainly sideways trading, though there are expectations of a slight rebound from positive sentiments after the rally in global markets, as well as the strong performance in Saudi Arabia's market.
"We expect a limited rebound in the UAE markets due to the correlation with international and regional markets. This rebound will be clearer in the Abu Dhabi Securities Exchange, as the banking sector showed a strong rally at the end of last week," said Mohamad Al Beheiri, Trading Manager at Amanah Financial Services.
He expected the rally in the banking sector to have a limited impact on the ADX because of the continuous decline in the real estate sector.
"Low turnover and shortage in liquidity will continue to create pressures on the Dubai Financial Market (DFM). There is a possibility of a rebound, but the main outlook is sideways trading. The real estate sector is dominating the DFM and the current negative impact of real estate firms on the index is creating more pressures and may lead to some retreat in the index," Al Beheiri said.
However, he added there was a need to achieve stability and calm trading throughout the first quarter of the year. "UAE markets should go through a stable period. We do not need strong fluctuations at this stage. Any rebound should be limited because there is a repeated pattern in the markets in which a rebound is followed by a strong downturn. This pattern needs to end very soon."
Al Beheiri predicted that the downturn would not have a strong impact on the indices in the short-term.
"Negative sentiment is continuing in the markets because leading companies have delayed the release of their 2008 results, opening the way for more rumours among investors."
He also expected more trading activity in the short-term, as prices have reached very low levels and the possibility of more losses in the markets has declined to a minimal. "This situation will encourage investors to inject more liquidity in the markets. But this new liquidity will be very cautious and trading will focus on selected stocks. However, we expect active trading to accelerate by the end of the first quarter."
The DFM witnessed a pattern last week in which the market started its sessions with a bounce only to fritter away its gains and end on a downward trend by the end of the session. There was increasing selling pressure by foreign institutions during the last few sessions, which dragged the index down whenever it tried to rebound.
The DFM is expected to get support at 1200-1300 points while the resistance channel remains at 1500-1550 points.
The banking sector is expected to support the ADX after the move by the Abu Dhabi government to bail out the emirates' banks by Dh16 billion.
The Abu Dhabi index will face resistance at 2220-2250 points, while it will get a support level at 2100 points.
The ADX advanced at the end of last week's trading and is now approaching its resistance channel.