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Indices race up in accumulation frenzy

The Dubai Financial Market Index gained 8.62 per cent to close at 877.57 as the UAE benchmark NBAD General Index closed 5.4 per cent up at 15,166.5 points.

On February 14, DFM index hit its lowest in the past six months, down by 38 per cent from the September peak as the NBAD index reported more than 30 per cent loss.

The UAE market reported a huge turnover of Dh4.6 billion yesterday as leading shares such as Emaar, Amlak, Commercial Bank of Dubai and National Bank of Dubai posted substantial gains.

The investor rush to pick up some of the low priced shares gave major push to market activities yesterday.

The UAE market went through a sharp decline from January 28 when Emaar, the company with largest market capitalisation declared its full year results far below the market expectations.

“The ‘Emaar effect’ had impacted the whole market. As profits (that fell short of expectations) as well as the company’s refusal to distribute bonus drove down the share prices, bear operators with prior knowledge of corporate action sold in advance adding to the downward spiral,” said a DFM broker.

The market operators who sold Emaar high on Monday in the range of Dh18.50 to Dh18, have been buying heavily on Wednesday and Thursday. From Monday’s opening to Tuesday’s closing, the share fell about 10 per cent.

The bears are understood to have made a killing through their sales on Monday and many were accumulating on Wednesday and Thursday.

“It has been classic case of bears driving down the market and re-entering cheap. The unsuspecting investors who sold in panic have lost and will have to pay higher to prices to buy the same shares,” an analyst said.

Emaar share closed 10.65 per cent (Dh1.80) up at Dh18.70. The scrip posted an intra-day high of 19.40, up by 14.7 per cent from the previous closing. The counter traded a massive volume of 146 million shares worth Dh2.73 billion.

Other leading services sector shares such as Amlak Tabreed, Shuaa and Arab Unromantically Logistics gained more than 6 per cent yesterday.

“The wave like movements will continue on the market as the volatility is very high. Small investors should control their fear and greed to survive such wild fluctuations,” said P. Krishnamurthy, a market analyst.

Abu Dhabi bourse also witnessed big gains yesterday as the banking sector shares reported big gains. NBAD closed Dh3.35 (7.8 per cent) up at Dh45.45 as Abu Dhabi Commercial Bank, Union National Bank and Abu Dhabi Islamic Bank gained more than 5 per cent each. In the services sector, Etisalat gained 3.7 per cent to close at Dh25.20 as Dana Gas and A’bar gained 7.8 per cent each.

Analysts expect the market to remain volatile throughout the first quarter. According to a Reuters survey of analysts and fund managers, the market is unlikely to regain to its 2005 peak this year. According to the survey, four out of seven analysts believe that the market will not reach 1,000 points in the first half of 2006. Amidst the hope of a gradual market recovery, investors are complaining of rigging by insider traders. “Companies have to become more transparent about their results and should be careful that price sensitive information is not leaked. The wild movements as happened to Emaar shares could erode investor confidence in the market,” said an analyst.