DFM may remain range-bound

Analysts are divided over the immediate fate of the UAE stock markets, with some predicting they will continue their recovery while others warn that flagging momentum could leave them prone to another slump.

After a sticky start last Sunday when the Dubai Financial Market (DFM) suffered its biggest one-day loss in seven weeks, its General Index embarked on a four-day winning streak to recoup these losses and close up 1.13 per cent for the week. It will open today on 5,466 points.

The Abu Dhabi Securities Market (ADSM) also shrug-ged off early-week selling pressure to gain two per cent last week.

The return to form was boosted by a spike in trading activity, with turnover significantly eclipsing the average of last month.

“There is still strong interest from local and foreign institutions for further buying,” said Sherif Abdul Khalek, Al Futtaim HC Securities dealing room manager.

“I believe that if the market can hold around today’s opening price with steadily increasing volumes, we can expect a rally within the next two weeks.”

Shiv Prakash, MAC Capital Advisors equity investment analyst, is more cautious, warning the DFM’s close on Thursday was not especially bullish and that any close below 5,430 points would prompt further selling to drag the market down to around the 5,300 mark.

Chahir Hosni, EFG Hermes sales manager, believes Dubai could add another 200 points this week, but will remain in a range between the 5,250 and 5,700 levels unless volumes pick  up dramatically.

Turnover is gradually improving, but investors seemed little moved by reports late last week suggesting the UAE regulator was considering amending its rules to allow foreigners to hold up to 75 per cent of a company’s shares. The current limit is set at 49 per cent. “This would be a major decision, so I don’t think we will see anything announced any time soon. But if these reports are accurate then relaxing these rules would have a big positive effect on the market,” said Hosni.

The ADSM could add another 100 points this week to challenge the 4,850 mark. Such a move would put it in sight of its 52-week of 4,946, which it hit on January 16.

“The market could challenge this mark, but on current form, one should assume it will not until proven otherwise,” said Hosni.

Thursday’s combined volumes on the UAE stock markets totalled just above Dh2.5 billion, the highest figure of the week, but this number will have to top Dh3.5bn for the stock exchanges to threaten their respective annual highs.

“Dubai is some way below its best of 6,300 points, so it will have to break 6,000 points before it can think of breaching the higher figure,” said Hosni.

“Abu Dhabi’s target is more achievable in the near-term, but the capital’s volume must exceed Dh2bn for this to become reality.”

DFM said foreigners were net buyers of Dh283 million worth of shares on the bourse in the week to April 3. They purchased Dh2.513 billion worth of shares on the exchange, accounting for some 38 per cent of the total value of stocks traded, the market said yesterday. Foreigners also sold shares worth Dh2.231bn.