Pre-result jitters drag DFM shares to 18-month low

DUBAI — The UAE bourses reported a sharp fall in share prices of most liquid shares yesterday as investors began speculating on lower second quarter results.

By Babu Das Augustine (Assistant Editor)

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Published: Thu 15 Jun 2006, 10:41 AM

Last updated: Sat 4 Apr 2015, 3:24 PM

“What we are witnessing is the pre-result jitters. Investors believe that most companies including banks and property companies are likely to report profits less than the market expectations. The market is a bit pessimistic about the second quarter results,” said Daheer Quraish, General Manager of Esham Securities.

There is a general consensus among the investors and the market intermediaries that most companies will be forced to show lower profits and growth in the second quarter because of the impact of the market slump since the beginning of this year. While the DFM index has slipped more than 50 per cent from the beginning of this year, losses are more than 60 per cent form 2005 October when the Index peaked at 1205 points.

“While many companies will have to revalue their market linked investments, it will be interesting to see how many banks will perform in this quarter. Those banks which heavily relied on trading profits, interest incomes from IPO leverage and stock lending in the secondary market will be under pressure. Significantly, absence of major IPOs during the second quarter is also expected to adversely affect the fee-based incomes of banks,” said an investment banker.

The Dubai Financial Market Index (DSI) fell 2.95 per cent to 455.89 points, as the Abu Dhabi's index slipped 1.7 per cent to 3,589.34 yesterday. The UAE benchmark National Bank of Abu Dhabi Index fell 1.75 per cent to 11,504 points.

The UAE market capitalisation was down by Dh13 billion at Dh656.8 billion. From October 2005, shareholders of UAE based companies have lost close to Dh150 billion in share values. DFM reported close to 100 per cent increase in volumes on Panic selling. In 6000 trades the market transacted more than 91 million shares worth Dh756 million. In Abu Dhabi, turnover fell 25 per cent to Dh975 million as volume fell 30 per cent to 69.7 million shares.

DFM shares including property major Emaar came under huge selling pressure yesterday. Emaar was down 4.05 per cent at Dh11.85. “The price is very attractive, except the overall market panic there is no reason to explain the fresh round of corrections. The second quarter results will have a major impact on the market,” Quraish added.

Emaar has started releasing a batch from a rights issue which has also triggered aggressive selling. The big fall on the Emaar seem to have prompted selling on other leading liquid counters such as Amalk and Aramex which fell 3.28 per cent and 3.42 per cent, respectively.

Abu Dhabi market has been reporting unusually large volumes during the past few days due to the huge interest in ADIB shares and the potential institutional investment in some of the leading property companies. An Abu Dhabi-based pension fund had announced two weeks ago that it was planning to buy stocks with low valuations, however interest seem to have waned as the prices were up as a result of a speculative rush that started on ADIB counter. “Although several incentives such as buyback and pension fund buying have been announced the investors are not clear about the direction of the market. Majority are now looking forward to the Q2 results to get a hint of the direction,” said P. Krishnamurthy an independent analyst.

Abu Dhabi's three most heavily traded stocks fell more than 5 per cent due to speculative selling.

Abu Dhabi National Energy led the selling spree on ADSM. The scrip fell 5.39 per cent to Dh3.16.

Abu Dhabi Islamic Bank which reported close to 100 per cent gain in recent weeks due to speculative buying fell fell 5.77 per cent to Dh84.95 on profit taking after steady rise over the past few weeks driven in part by speculative buying.

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