DFM falls as recent market upswing comes to a halt

 

The Dubai Financial Market fell for the first time in seven sessions as many investors switched their attention to Depa’s debut on a rival index, while declines on global exchanges also took their toll.

 

Turnover on the DFM’s General Index fell by more than Dh500 million to Dh1.92 billion, bringing the recent market surge came to an abrupt halt. The number of shares traded also fell by 15 per cent to 373m.

 

Only four companies made gains and this quartet’s combined volume was just 330,000 shares, so sellers clearly dominated trading.

 

This profit taking pushed the Dubai bourse down 1.2 per cent to 5,708 points, although it did mount a modest late rally after falling through the 5,700-barrier.

 

“After three straight gains this week, profit taking was expected, although its severity was a slight surprise,” said Ayman El Saheb, director of operations at Darahem Financial Brokerage. “Several factors came together to provoke yesterday’s correction. The most significant is simply that people wanted to cash in on selected stocks’ recent gains.

 

“Depa also drew liquidity from the domestic markets – when a new company lists its normal for investors to want to play with the stock a little. Depa will be volatile for a day or two and then some of this money should switch back to the DFM.”

 

All active sectors fell, with real estate and utilities bearing the brunt of the selloff. Deyaar was the most traded stock and dropped 2.55 per cent to Dh2.29 after a second company employee was detained in connection with suspected financial irregularities. Emaar fell 1.68 per cent to Dh11.70, while Tabreed and du retreated 2.28 and 2.74 per cent respectively.

 

“Emaar touched Dh12, but couldn’t break this barrier so investors decided to take profits in the hope of buying it back at Dh11.60 to Dh11.70,” said Saheb.

 

Amjad Bakir, trading manager at Mac Sharaf Securities, said Emaar should have closed above Dh11.80, but broke this point in the last 15 minutes of trading. Arabtec was another casualty, slipping 0.96 per cent as investors cashed in on its startling recent gains.

 

There was better news on the Abu Dhabi Securities Market, which edged up 0.03 per cent to 5,015 points, despite the capital witnessing a similar slump in trading to Dubai.

 

“The bourses were affected by a downturn in global markets as international investors also took profits,” said Mac Capital’s Bakir. “The closing of the US markets will have a bearing on how the UAE indices fare today.”

 

Aldar was the most traded stock in cash terms, claiming Dh234m of the ADSM’s Dh1.02bn turnover, and this activity propelled it up 0.44 per cent to Dh11.45.

 

Like Dubai, the capital’s headline gainers were all low-traded stocks. These included Fujairah Building Industries, which has jumped 86 per cent since April 8.

 

Finance House was another to prosper on the market, surging 8.41 per cent to a 52-week high of Dh12.25.

 

“Abu Dhabi was more stable and didn’t record as large gains as Dubai, so there’s little incentive for investors to cash in to simply break even,” said Darahem’s Saheb.

 

“But investors on the Abu Dhabi market could yet be panicked by further falls in Dubai and so decide to sell up. However, Dubai has more day traders, so I would be surprised if Abu Dhabi entered a downward trend – there is no compelling reason for it to do so,” he said. Trading is also slackening ahead of the April 30 deadline for the Dubai Investments rights issue.

 

 

Cautious optimism

 

Analysts are divided over the immediate fate of the DFM.

 

Some, like Ayman El Saheb, director of operations at Darahem Financial Brokerage, are cautiously optimistic, while others believe yesterday’s reverse shows the DFM’s recent rally was merely a temporary phenomenon.

 

“People are still bullish and yesterday’s correction could provoke a stronger rally in the near future,” said Saheb. “The correction may deepen today, although I expect to see some speculators buying in the hope of an immediate rebound. It’s too soon to say whether this is the start of a significant correction or whether it’s merely a minor slip,” he said.

 

Some investors were already buying back selected stocks in late trading yesterday. For example, the DFM’s own shares fell to Dh5.65, before a strong finish helped it climb to Dh5.81 and limit its losses to 0.68 per cent.

 

Amjad Bakir, trading manager at Mac Sharaf Securities, largely echoes Saheb’s views. He said: “The main trend is still up and the market held up OK despite the profit taking. Dubai needs to close above 5,720 to resume its recovery.” He predicts funds will accumulate at current price levels following yesterday’s fall, and this should prevent the Dubai market from suffering a more sustained correction.

 

Chahir Hosni, sales manager at EFG Hermes, is more pessimistic, reiterating his prediction readers may remember from last week when he stated the market would make gains for a few sessions, before retreating again. So far, this view has been vindicated.

 

“The DFM remains in the same range of 5,200 to 5,750 points and reached the upper boundary, but hasn’t been able to break out,” he said.

 

“Yesterday’s volumes indicate that there is no major change in the market. Some companies have announced very positive first quarter results, but most of these were expected – there haven’t been any big surprises.” However, the Dubai index may enjoy a mini rally today, Hosni said, although the broader trend will see a gradual decline.