Sustained late profit-taking wiped out early gains on the Dubai bourse yesterday and analysts warn low volumes indicate a correction is imminent.
This downbeat short-term forecast contrasts with the more optimistic pronouncements of earlier this week, but Dubai’s inability to challenge the 6,000 point mark has led to a rethink on its immediate future.
The Dubai Financial Market closed up 0.07 per cent at 5,932 points yesterday, having retreated from an intraday high of 5,989.
Turnover totalled Dh1.79 billion, which is 10 per cent below the February daily average of Dh1.99bn and 19 per cent short of the January figure of Dh2.2bn.
“January not only encompassed the results season, but there were two interest rate cuts, which added another spur to the market, while February has seen a dearth of news, so the slowdown in trading is not surprising.” said Alok Nawani, Mac Sharaf Securities equity investment analyst.
“It was expected to move sideways yesterday.”
The DFM’s ongoing gradual improvement has not been supported by volumes and so looks like running out of steam as the 6,000-mark approaches.
“Technically, the market is due to correct, so we saw some profit-taking ahead of this,” said Ganesh Mani, a Waves Investments analyst.
The same is true for the Abu Dhabi Securities Market, which is moving in broadly the same direction as Dubai and also lacks any news to spark a move upwards.
“The ADSM tends to move during results periods, but in other times it doesn’t usually see much volatility,” said Nawani.
The capital’s bourse fell 0.2 per cent to 4,831 points yesterday as turnover dipped below Dh1bn.
Etisalat, Aldar, Rak Properties and Dana Gas all declined, with the latter taking the biggest tumble of this quartet to fall 2.4 per cent. “Profit-taking was expected after its recent gains. Etisalat has been propping up the ADSM,” said a senior analyst, who did not wish to be named.
“Its dividend was very generous and will motivate medium and long-term investors to hold on to the stock for even longer. This extra stability will benefit the market.”
Abu Dhabi Aviation continued its momentous rise, as predicted by this column yesterday. This time it climbed 6.97 per cent to Dh5.37. The stock has now surged 51 per cent since February 19 and many commentators doubt its recent change in management could spark such a recovery.
“Investors are waiting for the Ajman Bank IPO (initial public offering) to be over,” said Nawani.
“With little stimulus in the market, we may have to wait for the bank to list for volumes to pick up. At around Dh515 million, it’s not a major IPO, so it won’t add much cash to the market, but day traders are likely to sell their stakes and move this money into other stocks with upside potential. Historically, IPOs have got the market going upwards, so there’s no reason to think this won’t happen again,” Nawani said.
Meanwhile, Arab Insurance Group left the rest of the Dubai index standing, surging 13.7 per cent to Dh4.15, which means it has jumped 25 per cent in two sessions.
Emaar returned to the doldrums as it failed to hold an intraday peak of Dh12.80 yesterday, eventually falling to Dh12.45, which represents a decline of 1.2 per cent for the session. “It’s vital for Emaar to trade heavily above Dh12.75 and to stay there,” added the unnamed analyst.
Air Arabia fell 1.39 per cent to Dh2.12, and Nawani believes it is now trading at an upper limit. The budget carrier, which is a favourite of day traders, was stuck around Dh2 before announcing an expansion of its fleet, but there is now little news to push it higher.
DFM Stays In Black
The DFM had Dubai Islamic Bank to thank for staying in the black yesterday. The Shariah-compliant lender, which is Dubai’s fourth largest company by market capitalisation, leapt 3.78 per cent, a 52-week high of Dh12.35. It was also the most traded stock in cash terms, with Dh406m of shares changing hands. Islamic mortgage provider Tamweel also prospered, climbing 1.77 per cent to Dh6.88.
“DIB is catching up with the market and is moving forward on a wave of positive sentiment,” said Ganesh Mani, a Waves Investments analyst “International investment houses have released a clutch of positive reports on Gulf banks recently.
Commercial banks have moved up and are now seeing some declines, so investors have now turned to Islamic institutions.”
Market’s 6,000 Barrier
Analysts describe Dubai’s 6,000 to 6,080 point range as an especially tough barrier to break.
“At the end of the session yesterday, the market showed some weakness and this could be the prelude to more profit taking over the coming sessions, leading to a decline,” said a senior analyst.
“The market will probably head downwards until mid-March.”
Ganesh Mani, a Waves Investments analyst, reports two trends coming together to limit the market’s aspirations.
“Technically, Dubai seems to be reaching some kind of top and can’t break 6,000 – there are no leaders to take it above this figure.
“Secondly, the Al Qudra IPO will be worth something like Dh3.5bn, so if this is oversubscribed by three or four times it will drain liquidity.”