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UAE stocks to move up after post-Ramadan correction |
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09.22.2009 |
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After recording an unexpected rally during the month of Ramadan, the UAE bourses - Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) - are expected to witness a correction before strengthening again on positive economic news.
An anticipated profit booking during the last week of the holy month did not occur, pleasantly surprising many analysts. The level of consumer spending during Eid usually prompts investors to cash out just before the festival.
"After Eid, there will be a correction. Finance and real estate stocks will drop, while energy and consumer staples shares will either surge or continue flat in range-bound trading. This is expected to continue until third-quarter results are posted," said Taimur Saadat, senior financial analyst at Arab Capital Markets Resource Centre.
Eid begins today, which means trading on the DFM and ADX will be closed for three days and will resume on Wednesday.
Given the recent continuous rally, market analysts say a post-Eid correction is inevitable.
Despite profit-booking in the first two sessions, the DFM general index added 4.28 per cent to close last week at 2127.62 points, a net gain of 87.44 points over the previous week's closing of 2040.18.
The UAE bourses are moving in tandem with global cues except for brief periods when strong regional factors come into play. This is another reason the indices may move upwards in the fourth quarter, as economies in the US, Europe and Asia show distinct signs that they have bottomed out.
Wadah Al Taha, senior financial analyst, told Emirates Business: "We are totally following international markets, particularly the US bourses. These gave some psychological indications that they would continue moving up, but the up move went faster than expected. So profit taking, which was supposed to take place on Wednesday or Thursday, has been postponed. After Eid, we will witness profit booking and the market is likely to continue range-bound afterwards."
US stocks last week rose on positive hopes about corporate revenues. However, after a continuous rise of more than five per cent, oil prices slipped to $72 a barrel on Friday following the rebound of the US dollar.
Foreign investors are adding to the UAE markets' upward move, while renewed buying interest from Arab investors is adding to the optimism. Foreign investors bought Dh1.80 billion worth of stock during the last week of Ramadan and institutional investors purchased Dh1.03bn. Foreign net buy was at Dh213m and institutional net buy was Dh157m. Net buying by Arabs was at Dh29m during the week.
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Source:www.zawya.com |
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