Weak global cues drag Dubai bourse down
Global market corrections and weak sentiment in local markets joined hands yesterday to drag the Dubai Financial Market (DFM) down sharply, with speculators and daily traders assuming complete control of the market.
The DFM witnessed strong selling pressures on leading active stocks at the beginning of the week after global markets witnessed a strong correction during the weekend and gave negative indicators for local investors. The index lost 82.17 points, or 4.97 per cent, and closed at 1570.09 points yesterday. The market broke through several support areas and is expected to test its next support around 1520 points this week.
Apart from the negative impact of global markets, the sentiment in local markets has become very weak, with the majority of listed companies not releasing their financial results for the fourth quarter so far. There are worries over poor results, which in turn have increased confusion and uncertainty among investors and led to more selling pressures in the market.
"There was a steep fall across the board due to high volatility and the absence of institutional investors," said Taimur Saadat, Head of Technical Analysis at Arab Capital Markets. "Retail investors and speculators dominated trading and created a sort of panic selling yesterday. Institutional investors withdrew in October and are still on the sidelines. Retail investors were exiting the market yesterday amid the negative sentiments and there were no strong buyers."
Mohamed Al Beheiri, Trading Manger at Tadawul Shares and Bonds Mediation, agreed that strong pressures came from speculators and short-term investors as part of their stop-loss strategy.
"They are expecting further downward movements in the DFM and exited now to buy again at lower prices. The DFM looks very weak at present because of the correction in global markets and the lack of local movers that can change the sentiment among investors. Speculators are in control and they are creating very aggressive volatility in the market," he said.
"There are signs of worry in the DFM. The market did not react to previous rallies in global markets while it is overreacting to corrections in global indices now. Yesterday, the DFM's losses were higher than those in the US or European markets; this overreaction is not justified," Al Beheiri added.
Turnover surged yesterday, with 270.6 million shares worth Dh459.2 million changing hands. Emaar and Arabtec continued to lead the market and dominated almost 50 per cent of the turnover. Emaar was also the top loser after it dropped by 9.73 per cent to close at Dh2.97. Arabtec fell 8.05 per cent to Dh2.17 while the DFM stock lost 9.43 per cent to close at Dh1.44.
"With this downside movement in the market, we expect Emaar to continue its downturn to its next support level of Dh2.85, while the target for Arabtec will be Dh2.10; the DFM may reach Dh1.35," Al Beheiri said.
Saadat attributed the low turnover to the absence of institutional investors, and said this could drag the DFM index further down. "The turnover reflects the lack of liquidity and inactivity among institutions, which preferred to stay away. There may be some bounce in the market in the next two sessions but it will not last for a long time as institutions are not supporting it."
However, he said the downturn in the DFM has created good investment opportunities for the long term. "We believe good opportunities will appear next month or in March. We expect a rally in the DFM by the end of the second or third quarter this year."
Despite the correction in global markets having a negative impact on local ones, Saadat saw this correction as a positive for the UAE economy. "Commodity prices are going down while the US dollar is strengthening. This will support the UAE dirham and the economy in general."
Despite trading continuing at a calm pace, the Abu Dhabi Securities Exchange went down for the fourth consecutive session yesterday amid negative impacts from global markets.
The ADX index lost 36.64 points, or 1.39 per cent, to close at 2600.09 points. Turnover remained low, with 91.7 million shares worth Dh199.5m changing hands. Real estate stocks continued to lead the market and created the highest pressures on the index.
Aldar lost seven per cent to close at Dh4 while Sorouh dropped by 6.58 per cent to Dh2.24 and Rakprop slipped 5.66 per cent to Dh0.50. Energy stocks added more pressure as Aabar went down by 6.14 per cent to Dh2.09, while Dana lost 4.3 per cent to Dh0.89 and Taqa went down slightly to Dh1.17.
Etisalat witnessed active trading but remained flat at Dh10.95. Heavyweights in the banking sector ended mixed, as NBAD advanced slightly to close at Dh11.05 while FGB went down by 2.2 per cent to Dh15.30. "Calm trading remains the main story in the ADX and heavyweights, especially etisalat, are supporting the index during the downturn in the market," said Al Beheiri.
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