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Another day of consolidation for UAE markets |
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5/6/2008 10:37:35 AM |
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Combined turnover topped Dh4 billion yesterday, but the UAE markets moved sideways in another day of consolidation.
This was because most trading was concentrated in small cap stocks, with the big boys largely unmoved as the Dubai Financial Market General Index edged up 0.08 per cent to 5,847 points, while the Abu Dhabi Securities Market fared slightly better, rising 0.18 per cent to 5,054.
"The markets did okay yesterday and stayed in the same sideways trend," said Sherif Abdul Khalek, Al-Futtaim HC Securities dealing room manager.
"The main focus for investors was the small cap companies, which of course are not able to move the market no matter how large their turnover. These small companies are easy prey for speculators to make a quick profit when the trend is up."
As predicted in this column yesterday, Gulf Navigation was Dubai's star performer, topping both the gainer and volume charts.
Gulf Navigation's turnover exceeded Dh1 billion after yesterday receiving regulatory approval to allow foreign ownership of up to 20 per cent of its shares.
This pushed its shares up 11.4 per cent, with the new rules coming into immediate effect. Meanwhile, Arkan was the ADSM's main headline grabber as it claimed a third of the capital's trading.
Investors aren't heeding the warnings of some analysts who say Arkan is more than a third overpriced.
The firm's shares added another 4.52 per cent in anticipation of it also soon allowing foreign ownership.
Khalek said: "Investors should perhaps be cautious. While opening up to foreigners will undoubtedly boost liquidity, fundamentally there's no reason for Gulf Navigation or Arkan to go up.
"Gulf Navigation does not make huge profits or pay out generous dividends, although its sector is tipped for major growth and it's one of the largest players in the Gulf."
It would be unusual if retail investors were snapping up Gulf Navigation shares as a long term investment, because they typically operate on a short time horizon of days, if not hours. Deyaar also appears to be back in favour, climbing 4.3 per cent to Dh2.40.
The developer has struggled since the arrest of leading executives as part of a police probe into financial irregularities, but it seems some investors have used this as an opportunity to buy the stock on the cheap. Investors were also buoyed by Deyaar's new $450m residential project in Dubai's International Media Production Zone, which was announced on Sunday.
Aramex was also in high demand, claiming fourth place on the volume chart as the company's stock climbed 0.76 per cent to Dh2.62. Aramex has been in the doldrums since early March and was not helped by a bonus share issue last month, but it could be poised for a rally, brokers say.
"These smaller companies were largely unchanged during the market's resurgence in late April and so are catching up with the overall trend," Khalek said.
"The sudden rise in turnover is coming from retail investors, not institutions. When retail players see movement in certain stocks they like to join in and encourage each other to get involved."
Arabtec was another to escape the market's sideways mire, surging 2.89 per cent to Dh16 and a new record close.
It announced startling first quarter results late yesterday. This saw the construction giant's first quarter profit rise four-fold year-on-year, eclipsing forecasts, and so brokers expect it to reach new highs today.
The market big boys tracked the broad mood of the index, with Emaar and Emirates NBD closing unchanged, while du and Dubai Islamic Bank lost 0.48 and 1.28 per cent respectively.
"The blue chips saw some profit taking but mostly held their ground," said Khalek.
Du fell despite posting an 18 per cent increase in quarter on quarter earnings.
The firm's subscriber base has reached 1.76 million people since launching mobile phone services in February 2007, although new regulations show that the number of active subscribers is slightly less at 1.4 million.
Back to Abu Dhabi, Dana Gas and Aabar were other stocks in high demand as they built on Sunday's gains to add a further 0.95 and 4.8 per cent respectively.
Aldar Properties was dragged down by profit taking to finish on Dh11.90, just below Sunday's 16-week high.
Sorouh Real Estate returned to winning ways, climbing 0.1 per cent.
"Abu Dhabi is strengthening above a prop at 5,000 points and in the short to medium term has the potential to increase by 1.5 to two per cent," added Khalek.
Pressure to open up to foreign ownership
Pressure is growing on more UAE listed companies to open up to foreign ownership. Yesterday saw Gulf Navigation receive approval for non-UAE nationals to buy its stock, but much of the market remains off limits for foreign investors, both individual and institutional.
Etisalat and other strategic companies such as Abu Dhabi National Energy Company remain open to locals only. Much of this caution is understandable, with the UAE regulator having learned the lessons of other emerging markets.
The Asian financial crisis of the late 1990s was in part blamed on 'hot' foreign money suddenly exiting the market, which precipitated a stock crash, and many analysts have warned the UAE would be prone to a similar fate if current restrictions were removed.
However, foreign participation undoubtedly boosts a stock's liquidity and therefore its price, so UAE companies are increasingly looking at relaxing their rules, according to Mohamed Alami, Naeem Shares and Bonds international desk manager.
"Companies are under pressure from all sides to open to foreigners, with retail and institutional investors calling for a rethink, while restricted companies also face a battle to keep up with the rise of the rest of the market," said Alami.
"Firms should open up to foreign and not just GCC ownership, because foreign investors have shown themselves to be excellent team players that a company would want to have on board," he added. |
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Source: Business24-7.ae |
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