Blue chips drag down Dubai

Dubai's stock market fell sharply on Monday as profit-taking hit Gulf bourses in general, while Egypt was supported by hopes that the army would soon act to quell anti-government protests.

The main Dubai index sank 1.7 per cent to 2,623 points. Many analysts have been predicting a short-term pull-back for the market, which is still up 62 per cent year-to-date, and technicals suggested that pull-back might be starting.

Fourteen-day momentum has dropped in recent days even as the market has risen, and Monday's close left the index testing support on its uptrend line from early July; any break would confirm an end to the bull run for now.

However, Monday's turnover was modest with many investors still away for the Muslim Eid al-Fitr holidays, so the technical signals were not decisive. The long-term chart outlook is still bullish after last month's break above the October 2009 peak of 2,409 points.

Stocks which led the market up in the past few months were hit hard on Monday; construction firm Arabtec, the most active stock, fell 2.0 per cent and property developer Emaar lost 2.2 per cent.

Bahrain- and Dubai-listed Gulf Finance House, which dropped 2.7 per cent in Dubai on Sunday after poor second-quarter earnings, continued falling in early trade on Monday but then held chart support on its June low of 0.49 dirhams, closing flat at 0.50 dirhams.

At the end of last week the company reported that net profit fell to $2.70 million in the second quarter from $4.74 million a year earlier, reversing a rise in the first quarter. Furthermore, second-quarter profit included a $1.08 million gain from discontinued operations - casting doubt on whether the company's efforts to make its balance sheet leaner were reviving profits.

In Kuwait, Abyaar Real Estate was the most heavily traded stock and bucked the soft trend by surging 4.9 per cent to 64.0 dinars, apparently in response to stronger-than-expected earnings for the first half.

The Saudi Arabia, Qatar, Oman and Bahrain markets remained closed for Eid holidays and will reopen on Tuesday.

Egypt's index rose 0.4 per cent to 5,638 points in thin trade. Security and government sources said police were expected to start taking action as soon as Monday against supporters of ousted President Mohamed Mursi, who were gathered in crowded protest camps in Cairo.

By the market's close, they had not done so; any such action could cause fresh bloodshed. But as the market's more than 20 per cent rise since late June has demonstrated, investors are willing to tolerate a high level of violence if they think it will lead eventually to a more stable and effective government than the Mursi administration.

MONDAY'S HIGHLIGHTS

EGYPT: The index rose 0.4 per cent to 5,638 points.

DUBAI: The index lost 1.7 per cent to 2,623 points.

ABU DHABI: The index dropped 0.6 per cent to 3,877 points.

KUWAIT: The index edged down 0.1 per cent to 8,059 points.