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21 May 2024

Consolidate and wait is the way ahead on UAE’s bourses

By Matt Smith

Adrenaline junkies should avoid the UAE stock market this week, with analysts predicting another period of consolidation. The exchanges are likely to move sideways for the time being despite making healthy advances last week, with the Dubai bourse adding 2.88 per cent, while Abu Dhabi was up 4.51 per cent.


“Some more stability and consolidation will be welcome – there’s little selling pressure, which is a good thing because it shows investors have long-term faith in the market,” said Sherif Abdul Khalek, Al-Futtaim HC Securities dealing room manager.


The DFM will open on Sunday resting just above a major support of 5,750 points and is likely to trade in a two per cent range this week, said Abdul Khalek, with the next resistance level at 6,000 points.


The Abu Dhabi Securities Market will open at 4,778 points and will target 4,915, but analysts doubt whether it has the legs to overcome this hurdle in the near term. It is more likely both UAE exchanges will remain range bound for the rest of February before trading picks up next month.


“In the short term, I’m neutral on the markets, but in the medium to long term I remain bullish because of strong liquidity and attractive valuations,” said Krishna Murthy, Chief Executive of Al Rostamani financial services division.


“The markets will take off once companies announce dividends and bonuses, so we could be waiting until March for a significant move.”


Much will depend on the fate of the international markets, despite them having little direct correlation with those of the Gulf. Investors remain spooked by the ongoing speculation of recession in the United States, which would have a knock-on effect across the world, especially Asia, which is the source of the majority of US imports.


“The link between the UAE markets and their international counterparts has strengthened because of the increased presence of foreign institutions,” said Khalek of Al-Futtaim HC Securities.


Regular readers will be unsurprised to learn analysts are backing the real estate and banking sectors to be the focus for both individual and institutional investors this week. 


Khalek said: “Union Properties will seem upward movement, while Sorouh and Aldar continue to perform well.


“The DFM’s own stock and Air Arabia are also worth watching.”


Krishna Murthy predicts the Abu Dhabi energy sector will again see strong interest, while the industrial sector is also attractive.


“All seven listed cement companies posted strong full-year results and they traditionally have a good track record of awarding generous dividends and bonuses, so are likely to be in demand this week,” added Murthy.