Drake and Scull stock leads losses on DFM, whose index continued to slide on Wednesday

28/06/2018 06:35 AST

Drake and Scull’s (DSI) share prices plunged 10 per cent, the maximum permissible drop on a stock, on Wednesday for the third day in a row, bringing its year-to-date decline to around 68 per cent.

The stock led losses across the Dubai Financial Market (DFM) where the main index ended the day 0.74 per cent lower at 2,814.89. Other stocks were also in the red, with powerhouse Emaar down 1.8 per cent and Dubai Islamic Bank 0.41 per cent lower. Arabtec and Gulf Finance House fell 1.57 per cent and 4.48 per cent respectively.

The declines across the board come amid uncertainty regarding public companies’ exposure to Abraaj Group, the private equity firm that filed for liquidation in the Cayman Islands earlier this month.

Fund managers said that the Abraaj saga hurt investor sentiment at a time of already-suppressed appetite. Globally, trade tensions between the US and China as well as Europe have hurt markets, with the Shanghai Composite entering bear market territory on Tuesday. (A bear market refers to a decline of at least 20 per cent from recent highs.)

Interest rate hikes by the US Federal Reserve and a stronger dollar have also led global investors to pull their money out of emerging markets.

Attractive valuations

Technical analyst Osama Al Ashry said he expected further declines on the DFM index. He said the support level for the index is 2,720, which will then open the floor for the index to reach 2,550, a level Al Ashry expects to see in the coming month.

“Despite valuations being attractive, we’ve seen this slump in the market, and we’ve seen many stocks reach illogical lows. I’m worried the DFM index will stay in this range for a long time because it doesn’t rebound after reaching lows,” he said.

“I wouldn’t jump into buying anything at these levels because I expect prices to drop further.”

Discussing Drake and Scull, Al Ashry said he expected share prices to fall by another 5-7 per cent, even as he expected some correction in prices before that decline. He said support levels for DSI were at 0.675 fils.

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