Investors time sells with every rise
THE BENCHMARK DUBAI INDEX HAS SHED A SIZEABLE 18% SINCE JANUARY THIS YEAR
Traders in Dubai stocks have been selling at every rise and has led to the underperformance, and this trend is expected to continue until fresh cues emerge |
In the recent past, recoveries were used to sell and book early profits — as of now this trend is seen continuing.” Shiv Prakash | senior analyst with First Abu Dhabi Bank Securities
Traders in Dubai stocks have been selling at every rise and has led to the under-performance, and this trend is expected to continue until fresh cues emerge. This may yet take the market away from its current range.
The Dubai Financial Market (DFM) general index hit a high of 3,109 on June 12, only to fall 9 per cent by June 28. The index went on to hit 2,986 on August 8 and fell 10 per cent on October 16.
The index is still trading 2 per cent lower from its 50-day moving average of 2,815.24.
“In the recent past, recoveries were used to sell and book early profits — as of now this trend is seen continuing,” Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities said in note. Yesterday, the Dubai index closed more than half a per cent higher as property stocks kept DFM well bid, while Etisalat pushed the Abu Dhabi index higher. The Dubai index closed 0.59 per cent higher at 2,757.73.
“I think UAE markets are already significantly undervalued, yet the factors behind this resistance (in investors buying) are clear — ranging from the political instability to the toll it has on uncertainty revolving around oil prices,” Issam Kassabieh, senior analyst with Menacorp said.
Emaar Properties closed at Dh4.97, up 0.40 per cent, Union Properties 0.30 per cent higher at Dh0.669. The Abu Dhabi Securities Exchange general index was up 0.64 per cent higher at 4,988.74. Etisalat witnessed a breakout after it breached Dh16.70. “We expect another bullish run in Etisalat towards the given target zone at Dh17.00/17.40 in the near term,” Prakash said. (FABS had a buy on the stock on Sunday at Dh16.)
Elsewhere in the Gulf, the Tadauwl index closed 0.13 per cent lower at 7,648.15. The Muscat MSM 30 index closed 0.19 per cent lower at 4,444.34.
The market can benefit from rotation out of other GCC markets, including Kuwait and Qatar, which have done well year to date.” Charles-Henry Monchau | Chief investment officer, Al Mal Capital
The Dubai index, which has underperformed the Abu Dhabi index, has shed 18 per cent since the start of the year compared to the 13 per cent gains on the Abu Dhabi index. “The UAE, especially Dubai, is trading at inexpensive valuations, thereby pricing in much of the slowdown,” said CharlesHenry Monchau, managing director, chief investment officer and head of investment management at Al Mal Capital. “The market can benefit from rotation out of other GCC markets, including Kuwait and Qatar, which have done well year to date because of non-fundamental factors.”
The rest of the regional markets have been outperforming. The S&P Pan Arab is up 6 per cent year-to-date, sharply higher than other emerging markets. “Going forward, overall GCC markets are expected to be relatively resilient and somewhat un-correlated to global factors. Vis-a-vis the EMs, the Gulf has two strong cards: oil and pegged currencies,” Monchau said.
Brent prices saw levels not seen since 2014, with 20 per cent gains so far in the year.
Kassabieh expects a recovery next year. “I would see a clear pickup in 2019 as the expo approaches and the federal budget and news reforms reflect on the private sector.”