Dubai and Saudi bourses see heavy buying, others still struggling
While the correction in Dubai was partly due to the geopolitical tension, it was also looking for a chance to correct, as some experts believe it was an overheated market.
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After Tuesday’s massive sell off in UAE and Saudi Arabia’s stock markets, which was triggered by concerns over possible military action against Syria, selling pressure in both somewhat abated yesterday as investors stepped in to take advantage of the fall in share prices and buy bluechip stocks.
As a result, Dubai’s benchmark DFM General Index ended 1.30 per cent down to 2516.48 and Saudi Arabia’s TASI Index in fact added 0.37 per cent to end at 7751.32. The Bahrain All Share Index was also up 0.30 per cent.
The remaining Gulf markets declined with Abu Dhabi’s ADX General Index slipping 2.22 per cent, Oman closing three per cent lower, Qatar 2.29 per cent and Kuwait 0.76 per cent. Emaar Properties, the biggest developer of the region, had the highest turnover of Dh243.25 million and remained unchanged at Dh5.70. Emirates NBD, Dubai’s biggest bank, was up 1.66 per cent. Air Arabia and logistics company Aramex advanced 0.75 per cent and 2 per cent respectively. The number of decliners still was in a majority, with 24 stocks retreating, three advancing and four remaining flat.
In Dubai, the early and late morning session witnessed extreme volatility with the gauge swinging in between four and close to seven per cent, before investors started buying after realising the previous day’s and the early correction yesterday was exaggerated, which in fact presented them with opportunities for buying bluechip stocks such as Emaar Properties and Emirates NBD.
“Yesterday’s decline was news headline driven rather than based on fundamentals and today we saw buyers step in because those underlying fundamentals remain unchanged,” said Amer Khan, director at Shuaa Asset Management.
UAE’s strong economic recovery underpinned by a resurgence in the real estate and banking sectors and along with solid trade numbers, increasing tourists and robust retail growth have contributed to a big rally in the country’s stock markets this year.
While the correction in Dubai was partly due to the geopolitical tension, it was also looking for a chance to correct, as some experts believe it was an overheated market. And the correction since Tuesday until the later morning session yesterday, was steep indeed. People realised that this was an exaggerated selloff and presented a good opportunity to buy shares.
“The markets became attractively valued in the middle of the trading session and that is why investors jumped in that led to a big recovery [in Dubai] at the end,” said Reda Gomma, portfolio manager at Mashreq Asset Management. “Some part of what we saw [a decline to about seven per cent again] in the morning was due to margin calls and as a result, retail investors were selling aggressively in the morning. So that kind of distressed selling initiated buying from other investors.”
Margin calls occur when an investor’s account value depresses so much that one is forced to sell assets, in this case shares.
Yesterday’s resilience in Dubai and Saudi Arabian markets could possibly be because of a change in investors’ perception of the Syrian situation.
“Investors have maybe realised that even if the situation is escalating is Syria with the intervention of Western nations, GCC countries should still be immune from the conflict at this stage,” said Sebastien Henin, portfolio manager at Abu Dhabi based The National Investor (TNI). “We probably faced an overreaction from market participants.”
After talking to brokers in Saudi Arabia, Gomma said that the gain in the Gulf’s biggest stock market was due to the role played by market maker GOSI (General Organisation for Social Insurance), which stepped in.
“At the start of trading this morning, Saudi Arabia’s index was down only two per cent and after GOSI fund coming in and buying, it helped the market to finally end in positive territory.”
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