News of the UAE Central Bank’s plan to cut interest rates breathed new life into the Dubai Financial Market (DFM) yesterday with the index gaining 17.46 points, or 1.17 per cent, to close the day at 1508.05 on the back of renewed buying interest.
The DFM had been moving in a directionless manner for the past several sessions in the absence of any positive trigger. Yesterday, though, barring the utilities sector, all other indices in the market closed higher.
The banking index gained 6.27 points, insurance was up by 8.13 points, the investment index rose by 20.87 points, real estate by 39.84 points, transportation by 7.29 points, and the telecom index closed higher by 12.94 points.
“In addition to the Central Bank’s plan for rate cuts, overnight gains on Wall Street and the oil price rise have also strengthened market sentiment. These three factors had a positive impact on the DFM because the market was looking for such triggers,” Sanyalaksna Manibhandu, research head, Emaar Saudi Financial Services, told Emirates Business.
Major stocks such as du, Air Arabia, Ajman Bank, Arabtec, Deyaar Development, Dubai Investments, Emaar Properties and NCC closed with more than two per cent gains.
Shiv Prakash, technical analyst at MAC Capital, said: “Ajman Bank advanced to near its resistance areas of Dh1.03 and later met some selling and closed with a net gain of 7.52 per cent at Dh1.00. Du continued its bullish streak and closed higher by 3.50 per cent at Dh2.36.
“The IAIC stock advanced 3.12 per cent to give a bullish close at Dh0.66, which is closer to the important resistance level of Dh0.69. If this is broken it can see the next resistance level of Dh0.75 in the near-term. Emaar was up again and closed higher by 2.02 per cent at Dh2.02.”
The other volume pushers were the DIB and DFM stocks, while the top losers included Ekttitab, Tabreed and GGICO.
Of the 23 stocks traded, 16 closed with gains, while six recorded losses and one remained unchanged.
Mathew Wakeman, Managing Director, cash and equity linked trading, EFG Hermes, said: “Most of Dubai’s large caps managed a two per cent gain today with no real standout in terms of performance.” Air Arabia feels very well supported at these levels and was raised to “buy” from “accumulate” at EFG-Hermes with a 1.53 fair value.
“The potential positive news flow that we may see in the coming weeks regarding the deployment of cash and stimulus looks set to give us a market rally that, in my view, could retest the 1,660 level in the near-term. The market has formed a bottom since last December giving investors confidence to deploy funds at these levels in the belief that the downside is limited. Stability in oil pricess in recent weeks is also helping to reduce the fear in the market,” said Wakeman.
The DFM recorded a total trading value of Dh300.73 million yesterday with 288.94 million shares being traded in 5,235 transactions. The investment horizon of investors certainly looks shorter, but the willingness to buy into ideas is clearly evident, analysts said. After opening flat, the index continued to move higher on sustained buying support at marginal to medium level. In the afternoon it touched the day’s high of 1,517 points and later went down in a restricted range before closing at 1,508.05 points.
“Retail investors and regional funds, who were just waiting for timely triggers to enter the market, have taken advantage of the rate cut news. There was buying interest seen at all the major counters,” said Shiv Prakash.
The plan to reduce interest rates is designed to strengthen the local economy and enable it to weather the impact of the global economic slowdown. The move aims at enhancing liquidity in the market.
Meanwhile in New York, the Dow Jones gained 178.73 points to close at 7,395.70 points yesterday. Wall Street posted its fifth gain in six trading sessions, after a surprise boost from a government report that home construction picked up in February. The news, which was unexpected, injected new vitality into a week-old rally.
“We hope there will be more positive impact on regional markets as the Central Bank’s rate cut plan coupled with the Wall Street rally will boost investor confidence. Despite market uncertainty, local investors have shown resilience to adverse factors. And now they have a reason to rejoice. Regardless of the how much the interest rate will be cut by, the decision itself has infused fresh confidence into the market,” said a regional fund manager.
Drake & Scull still down
Drake & Scull International (DSI) topped the list of volume pushers in yesterday’s trading on the DFM, with the scrip registering Dh57.58m in volume.
However, the DSI stock closed lower for the third consecutive session since its listing, losing 1.49 per cent to close at Dh0.66. “Drake & Scull drifted lower into the close after holding yesterday’s levels for most of the session. It still feels like the stock is being defended at these levels rather than consolidating for a bounce, so we could see further pressure in the near-term,” said Mathew Wakeman, Managing Director, cash and equity linked trading, EFG Hermes.
