Weak liquidity continues to dampen UAE equities

DFM ENDS ALMOST FLAT AT 3,078, ADX UP 1.61% TO 4,283.55

Weak liquidity and a lack of catalysts continued to hurt trade across the UAE’s equity markets yesterday, with the Dubai Financial Market (DFM) trading within narrow ranges and ending the day almost flat.

After opening at 3,084, the DFM index plunged to a low of 3,062 in the first few minutes of trade, but following narrow fluctuations, it ended at 3,078.73 – down 0.18 per cent. Liquidity stood at Dh297.4 million.

The Abu Dhabi Securities Exchange (ADX) general index ended in the green, however, jumping 1.61 per cent to 4,283.55.

The rise comes on the back of etisalat, one of the market’s biggest blue chips, which accounted for almost 30 per cent of trade values in Abu Dhabi. Its share prices were up Dh0.2 to reach Dh16.1.

Analyst Osama Al Ashry said he expected both the DFM and ADX to reach new lows this quarter. “Weak liquidity in the markets and relatively little buying activity despite attractive valuations are strong signals that the markets will drop. Lower than expected corporate earnings will add further pressure.

“I think the DFM index will see a new low around 2,500 by the end of Q1 before bouncing back strongly,” he said.

Al Ashry, a member of UK organisation Society of Technical Analysts, said that the ADX index was also trading in risky areas, being below 4,500. He said it could easily fall below 4,000, adding that he expected the UAE’s indices to drop another 20 per cent.

Limited impact

Discussing the impact of geopolitical tension between Saudi Arabia and Iran, Al Ashry said he did not expect the news to take a major toll on equities.

“I think there’s a lot of media propaganda around the Saudi/ Iran tensions because if you look at trade between Iran and the GCC countries, it’s fairly limited, so even if in the worst case scenario, trade is completely cut, this won’t have a significant impact on GCC economies.

I think news about the war in Yemen is a lot more significant on GCC economies,” he said.

On Saturday, protesters in Tehran set fire to Saudi Arabia’s embassy building as Iran condemned Saudi Arabia’s execution of 47 people, including a Shiite cleric, for terror offences.

Saudi Arabia responded by severing ties with Iran, as Bahrain followed suit, and the UAE downgraded its diplomatic ties with Iran.

“Yes, the

tensions

between both countries are negative news, but even negative news wouldn’t really impact a market that is already moving in an upward trend. But when liquidity is weak and sentiment is already negative, it won’t really take much to drag the indexes down,” analyst Al Ashry said.

On DFM, the market’s powerhouses ended the day almost flat. Gulf Finance House edged up 1.22 per cent, and Amanat rose 1.64 per cent, while Arabtec and Emaar were both unchanged.

Amlak and Dubai Islamic Bank dipped 0.76 per cent and 0.67 per cent respectively.

In the capital, Sharjah Group topped the gainers’ list with an 11.11 per cent increase, followed by Al Khazna Insurance with 10.34 per cent, Abu Dhabi Commercial Bank with 3.42 per cent, First Gulf Bank with 3.25 per cent, and Dana Gas with 2.04 per cent.

Of the 30 stocks traded on DFM, 13 went down, 11 went up, and six remained unchanged. Of the 27 stocks traded on ADX, 11 advanced, seven declined, and nine remained flat.

Elsewhere in the Gulf, the region’s equity indexes moved less than one per cent. Saudi Arabia’s Tadawul All Share index fell 0.66 per cent to reach 6,743.16 as Qatar’s QE index slid 0.82 per cent to end at 9,959.67.

Bahrain Bourse’s index ended 0.25 per cent lower to reach 1,210.03.