Attractive lower scrip prices, strong fundamentals to attract investors
The Dubai Financial Market (DFM), which is still the best performing market globally despite remaining volatile in June, is expected to continue bullish trend when trading resumes today (Sunday) on attractive lower scrip prices coupled with strong fundamentals.
The benchmark index of the DFM finally closed in positive territory after experiencing volatile activities during the last week that witnessed the index breached the 4,000-point physiological barrier in both directions. By the end of the week, index jumped more than four per cent to close at 4,399.64 points. The Index shaker Arabtec jumped by 13.55 per cent to close at Dh3.53 with 305 million shares transactions last week.
"Since Arabtec has cleared its position during the last week media briefing, the stock market should continue positivity activity and maintain the status of best performing market in the world," according to a senior stock analyst.
Dubai's stock market had been dragged down by construction giant Arabtec, which had plunged 63 per cent from a record high in May amid turmoil caused by the dramatic resignation of Hasan Ismaik, its chief executive. Arabtec stocks recovered some lost grounds after the media briefing and surged almost 15 per cent on Wednesday, the maximum daily rise allowed on the Dubai.
"Holy month of Ramadan always attract slow trading activity as majority of investors are Muslims and they fast from dusk till dawn, so there is no chance of continued big rally at the UAE bourses," according to the stock analyst.
On June 29, investors traded nearly 235 million shares, the lowest since August, compared with a 12-month daily average of 732 million. Since the start of 2013, the Dubai stock market has registered a near 200 per cent gain to become the best performing financial market in the world.
"UAE markets experienced sharp volatility this month [June] with the Dubai Index, the DFMGI, dropping 6.7 per cent on 24th June and recovering almost completely the next day. The DFMGI is down 20 per cent, since the peak in mid-May. The selloff has been broad-based, triggered by market news on management changes, investors being hit by margin calls and the seasonal pattern that repeats itself every year, with investors booking profits before Ramadan," Emirates NBD chief investment officer Arjuna Mahendran said in a weekly note.
"The three-month annualised volatility for the DFMGI is above 50 per cent and is the highest in the last four years. Dubai is still the best performing market globally on a one-year basis; its price-earnings ratio valuations are in line with the GCC's and cheaper than for most global and emerging markets. The ADSMI (Abu Dhabi) index also had sharp swings in June and is down about 14 per cent since the end-of-May peak," Mahendran explained.
The DFM Index suffered the monthly loss of 22 per cent in June, the most since November 2008, due to continued selling in property stocks led by Arabtec. The month's loss cut the benchmark index's estimated price-earnings ratio to 13.4, from a peak of more than 19 in May.
The UAE bourses began trading as emerging markets this month after index provider MSCI reclassified it in June 2013. Dubai's gauge more than doubled almost a year after the upgrade on bets the change will lure investors managing about $8 trillion in assets.