Negative sentiment and the absence of liquidity returned to hit trading on the Dubai Financial Market yesterday as all the gains made on Tuesday were wiped out and the general index fell below its important support level of 1720.
The index retreated 60.17 points, or 3.42 per cent, to close at 1699.43, the lowest level since May 21. The market opened with a sharp gap down of more than 50 points and continued in the downturn throughout the session with limited movements.
Turnover remained low with 238 million shares worth Dh320 million changing hands. Deep concentration of turnover returned to dominate the trading pattern with Emaar, DFM, Arabtec, Deyaar and DSI accounting for almost 75 per cent of total turnover.
These active stocks all retreated sharply and put high pressure on the index amid very weak market sentiment. The decline was across the board as 24 stocks slipped, only one advanced and one remained unchanged.
Commercial Bank of Dubai advanced as it added 4.48 per cent to close at Dh3.50 after announcing it had no exposure to Saudi Arabias troubled Algosaibi and Saad groups.
DFM is again showing a negative trading pattern as the index declines by two to three per cent for a few sessions before bouncing back sharply for one session then returning to the downtrend. This pattern was seen in late 2008 and early this year and its return is worrying for analysts who had expected that the second quarter results would be the only possible engine for active trading in the market in the near future.
"There is overall negative sentiment among investors," said Rami Al Thaqafi, Senior Director of Private Banking at Emirates NBD. "All global and local indicators have increased the negative sentiment. There have been significant reports about the US real estate markets that predicted a further 40 per cent decline in prices and a 45 per cent decline in occupancy rates for commercial buildings. This affected global sentiment about the sector and the markets went down.
"Also, S&P fuelled the negative sentiment in global markets when it said expectations of Q2 earnings for listed companies may decline by 17 per cent compared to Q2 last year. Declining oil prices also added to the negative sentiment in the markets."
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