Investors are blaming three factors for the ongoing malaise on the UAE stock markets, which saw them lose 120 points on Sunday.
The Dubai Financial Market fell 1.38 per cent to 5,752 points as investors largely stayed away. It was much the same story on the Abu Dhabi Securities Market, which dropped 0.82 per cent to 4,814 points.
Both markets were again blighted by low volumes, with combined turnover touching just Dh1.26 billion. This compares to the January and February daily average of more than Dh4.5bn.
Some are blaming the introduction of new brokerage regulations that have limited investors’ credit, while others say the real villain is the wider turmoil gripping the international equity markets. The third theory is that investors are unwilling to sell at a loss and so are waiting for the markets to eventually pick up. Whatever the cause, and it is probably all three factors have played a part, the subdued downward trend is expected to continue for the rest of this week at least.
Brokers are reporting that foreign institutions are not buying or selling, leaving day traders to shape the market.
“This is why the market is going down for two days and then up the next – short-term speculators are taking profits where they can,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager. “Institutions are not willing to sell heavily because they think they will not be able to buy again at the cheap prices they paid in the past.”
The Dubai bourse clung onto a support level of 5,750 points on Sunday, but it may hold there much longer.
“If the current trend continues, it will break this mark, no doubt about it,” said Ayman El Saheb, Darahem Financial Brokerage director of operations. “The losses may not be dramatic, but the market is steadily losing 100 points one day, 50 points the next, and although it sometimes makes gains, it’s gradually losing ground. There’s a lack of liquidity to support the index.”
After any correction, a market will consolidate. DFM has been in such a phase for eight weeks now, clawing back half of its losses since the crash of mid-January that saw it drop 1,000 points in a matter of days. This was the most savage downturn since the correction of 2006, so analysts warn the consolidation is likely to continue this week.
“The market is trend-less at present, so with no motive for going up, it is likely to slide further, although this doesn’t yet mean we are in a downturn even if it falls further this week, which is a strong possibility,” said a source who did not wish to be named.
Saheb said sentiment plays a critical role in determining the fate of the UAE exchanges. “Investor psyche is more important here than in many other regions.”
With local and foreign institutions and most high net worth players basing their buying strategies on analyst reports, Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager, believes the first quarter results will spark increased trading.
This is because analysts will take these figures to update their full year earnings forecasts for use by these groups.
“There will also be speculation before the results are announced, so I’m sticking to my prediction of a market upturn in the last 10 days of March. Foreign institutions aren’t trading right now because of events beyond our region,” he said.
SELLERS OUTNUMBER BUYERS
Emaar accounted for more than a third of Dubai’s turnover as the property developer again failed to hold above Dh12. It closed down 2.07 per cent at Dh11.80.
Air Arabia was the most active stock, claiming 23.8 million of 135 million shares that changed hands yesterday, but it fell along with next four most-traded equities.
These included the DFM and Deyaar, which dropped 1.49 and 1.17 per cent respectively.
This pattern indicates that sellers currently outnumber buyers, a point which is underlined by examining the top four gainers. These stocks – Public Warehousing, Global Investment House, Al Madina and Gulf Finance – saw 9,185 shares traded among them, which represents less than 0.01 per cent of the market total.
Low-volume stocks typically trade at a premium, with investors having to bid higher than the market price to persuade shareholders to sell, so it was no surprise to see the above quartet all increase by eight per cent or more.
Meanwhile, investors were able to find some respite on the ADSM as 13 stocks advanced, but again the major gainers were all low-volume stocks.
Here the top four gainers – RAK Ceramics, Fujairah Building Industries, Asmak and Finance House – saw 469,833 shares traded among them, which equates to 0.7 per cent of the capital’s total. Sorouh Real Estate retreated from Thursday’s all-time high, falling 1.82 per cent to Dh10.80, while RAK Properties slipped 1.13 per cent and Aldar was unchanged on Dh11.15. Etisalat declined by 1.13 per cent to Dh24.50.
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