DFM faces correction amid investor uncertainty

Severe selling pressure yesterday dragged the Dubai Financial Market down 70.73 points, or 3.51 per cent, to a close of 1943.36.

Profit booking, which started last week after a very strong rally by the general index during the previous few weeks, has turned into a severe correction due to uncertainty and fears among retail investors and speculators, according to analysts.

Turnover declined sharply to 381 million shares worth a total of Dh513.8 million, compared with daily average turnover of Dh1.6 billion so far this month.

The market opened with strong fluctuations and tried to bounce back at the beginning of the session on very low turnover. But the index could not maintain its position in the green area and then strong selling pressure hit leading stocks, especially in the real estate and banking sectors, which had very negative impact.

Drake & Scull International (DSI) was the leading active stock by volume, while Emaar was the most active by value. The stocks declined by 3.09 and 4.44 per cent respectively. Other stocks in the real estate and construction sectors, including Arabtec and Union Properties, also retreated.

Banking heavyweights Dubai Islamic Bank and Emirtaes NBD slipped 4.06 and 4.89 per cent respectively. Though banking stocks were trading on low turnover they put deep pressure on the index. Other major movers included Shuaa Capital, which declined by 9.8 per cent to close at Dh1.38 as its dispute with Dubai Banking Group over the conversion of Dh1.5 billion of bonds into shares continued.

Deyaar retreated by 6.9 per cent to close at Dh0.81 after the bourse resumed trading in the stock. The company announced the resignation of its chairman Nasser Al Sheikh and said its board of directors would meet soon to ratify the resignation.

Analysts said the DFM was experiencing nervous reactions and selling pressure created by uncertainty over the recovery in the global and regional economies.

Analysts also highlighted the impact of the earnings season as investors were focusing on expectations and rumours about results for the second quarter. "We were expecting normal profit booking movements in the DFM last week after the market rallied sharply during the past two months," said Kefah Al Maharmah, General Manager of Aldar Securities and Bonds.

"However, profit booking movements have turned into a severe correction in the market since last Thursday. We saw selling pressure from retail investors and speculators due to uncertainty, which returned to dominate sentiment among investors."

He said the sharp decline in trade value was an important signal that longer term investors were maintaining their holdings in the market or waiting on the sidelines for a clearer market trend to emerge.

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