Double-digit gains for 19 stocks on Dubai bourse |
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Nineteen stocks made double-digit gains to help the Dubai Financial Market claim its eighth-largest one-day rise yesterday.
After losing a third of its value in the preceding seven sessions, the DFM bounced back to climb 8.15 per cent to 2,143 points.
"This is a technical rebound after losing 800 points in a week," said Sherif Abdul Khalek, Beltone Financial institutional trading manager.
The General Index started tentatively and fell 20 points upon opening as Sunday's residual orders were completed, but cautious buying stopped it from falling further. The DFM then mounted two failed rallies before conclusively reconquering the 2,000-mark around the mid-session.
This sparked heavy buying, with investors increasingly confident that the index had at last found its bottom, with most of the blue chips soaring to near-maximum gains.
This propelled the index up to an intraday high of 2,168 points, before some late selling eased it down to its closing figure.
"We're not safe yet, but it seems we're on the mend," said Mohammed Ali Yasin, Emirates Securities managing director.
"There's a lot of cash on the sidelines, but it had no confidence to return to the market and so if the market continues to recover, slowly more people will return."
Emaar fell in early trading, before rebounding spectacularly to close up 14.98 per cent. Sixteen other stocks surged more than 14 per cent, including Arabtec, Amlak Finance, du and Dubai Islamic Bank. All active sectors advanced, although banking was a laggard after Emirates NBD and Commercial Bank of Dubai fell 4.96 and 1.42 per cent respectively. Overall, gainers outnumbered losers 25:3.
"The market fell by more than 30 per cent in just over a week, so a strong return is needed to show that maybe there's a consensus from various investor groups that we have reached the floor," said Yasin.
Yesterday's turnover was Dh742 million, which is more than double Sunday's total and the highest for seven sessions.
Emaar was top trader after seeing Dh244m of shares change hands, followed by Air Arabia with Dh71m and DFM Company with Dh67m. Yesterday's increase was the DFM's eighth largest of all time, while the top four have all been achieved this year. Similarly, seven of its 10 biggest losses have also occurred in 2008 to underline the volatility of the bourse this year. "If we were to test 2,000 again, the index could set a new low - sentiment is still very negative and the trend has yet to be reversed," said Khalek.
Foreigners were net buyers of Dh49m of shares on the DFM last week. Much of this cash is believed to have been used to cover short positions, which suggests overseas traders believed the market was poised to rebound.
"Short selling needs to be stopped. It's betting against companies and is very risky - these traders have an ethical responsibility and should cease short selling, which is happening at the custodian level," said Yasin.
"The authorities should ask to see the books and send a very strong message short selling is prohibited and any institution found involved will face severe penalties."
Further gains may be smaller
Analysts predict the Dubai bourse will make further, smaller gains today.
"I expect the market to continue to advance and it should add another three to four per cent," said Sherif Abdul Khalek, Beltone Financial institutional trading manager.
"Technically, a rebound should recover half the point lost in the preceding fall and so Dubai could reach 2,400 to 2,600 in the coming sessions.
"Tomorrow should see increased profit taking, although this depend on how active high net-worth investors and funds are. Foreign funds are largely absent and retail investors don't have the power to take the market much further."
Analysts had warned the market was in acute peril following Sunday's finish below 2,000 points and Emaar's slump to under Dh3.
Many feared a further collapse, but investors instead started accumulating, first in Emaar and then into most other stocks, particularly the ones hardest hit during the recent slump.
This should signal the market is at last bottoming out, although investors hoping for a spectacular rebound are likely to be disappointed, with most analysts predicting a broad consolidation trend punctuated by volatile moves up and down.
In the current downturn, traders have sold into every rally and so some profit taking should be expected today, although this is unlikely to be enough to send the market back into the red.
Meanwhile, Mohammed Ali Yasin, Emirates Securities managing director, urged investors not to become carried away.
"We face a big task to claw back the losses of the past week - we're trying to get Emaar above Dh6 again, so it's a case of trying to recover to more respectable losses," he added.
By Matt Smith
© Emirates Business 24/7 2008
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