The Dubai Financial Market (DFM) index bounced yesterday for the second time this week amid high volatility and speculative movements, which is projected to continue for the next few sessions.

The index advanced 62.34 points, or three per cent, to close at 2137.80 points on a strong rebound in Emaar and DFM stocks. Emaar advanced 6.17 per cent to Dh4.30 while the DFM stock added 5.69 per cent to close at Dh2.23. Turnover has continued to show a gradual decline this week, and yesterday was no exception with 288.6 million shares worth Dh679.3 million changing hands during the session.

High volatility continued in Emaar as the stock moved in a wide range of Dh4.1 and Dh4.34 during the session. There was a clear concentration of trading on the stock, dominating almost 48 per cent of the total trade value. High volatility also remained in other actives stocks, including the DFM, Arabtec and DSI scrips, but all of them ended the session with strong gains.

Financial stocks also added more bullishness in the DFM yesterday, as Shuaa Capital jumped 7.69 per cent to Dh1.82. Heavyweights in the banking sectors also reversed their losses in the previous session and advanced yesterday. EmiratesNBD added 2.39 per cent to end the session at Dh4.28 while DIB attracted good buying interest and advanced 1.44 per cent to close at Dh2.82.

"The current trend in the DFM indicates that the market is in the process of a double bottom formation," said Amjad Bakir, VIP sales trader at Direct Broker for Financial Services. "The DFM index may continue its upward movement to test it next resistance areas of 2157/2186 points in the near future. At these levels we expect selling pressures to appear again."

Bakir said the market might also face renewed selling pressures and the DFM index might go down to its next support areas of 2070-2020 points. "If the index breaks below these levels, the market will turn very bearish and may face strong selling pressures."

However, Bakir expressed concern over the declining turnover in the market. "Trade volumes are not encouraging investors, especially institutional ones, and they continue to remain on the sidelines. We need increasing volumes and values above Dh1 billion to ensure bullishness in the market.

"The market bounced up yesterday on positive movements in global and regional stock markets as well as oil prices, which advanced near $80 per barrel. These positive movements encouraged some investors to return to the market yesterday and buying was seen," said Bakir.

However, Humam Al Shamaa, financial consultant at Al Fajr Securities, blamed overreaction and high sensitivity to global markets for the current sharp fluctuations in the DFM. "There is no fundamental justification for the current deep correlation with global markets. The DFM is moving in the same direction as US markets since late last week despite the clear difference between fundamentals in the US and the UAE."

He said the Dow Jones had surged around 57 per cent during the past seven months while the DFM had surged around 40 per cent during the same period. "There were high expectations that the US and other global markets would face a correction because there is a clear mismatch between the markets' performance and the economic situation. The Dow Jones has rebounded sharply while the US economy is still in recession. European markets have also rebounded while their economies are still in recession but economic growth has not happened so far."

Al Shamaa said the average P/E ratio in the DFM was around 10 times compared with more than 15 times in the Dow Jones and 20 times in the Japanese Markets. "P/E ratios in UAE stocks are still lower than other GCC stocks markets. These fundamentals show that UAE stocks should advance at least 30 per cent to match their global and regional peers.

"The DFM is still suffering from panic selling when a correction appears in global markets. The correction may continue in US markets and this will have a negative impact on local markets due to the psychological impact," he said.

Foreign investors, not Arabs, remained sellers in the DFM yesterday, selling shares of Dh110.08m and buying shares worth Dh82.34m. "In fact, selling pressures were seen across the board and different types of investors were selling in the market this week. There is a negative sentiment due to the correction and high volatility in global markets," said Al Shamaa.


Positive movements likely to continue

Dubai Financial Market is expected to continue its bounce today at lower levels before it faces further profit booking and selling pressures, according to Amjad Bakir of Direct Broker for Financial Services.

He expects Emaar to continue leading the market and test its previous highs of Dh4.45/Dh4.55.

"The market looks bullish in the short-term and could show an advance at this week's close. However, investors should be very cautious during the current noisy sentiment," he said.

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