United Arab Emirates – Mubasher: UAE markets have become bound by the lack of internal catalysts and institutions keeping their distance from the markets and trading, Gamal Aggag, general manager at Al Sharhan Centre for Securities and Bonds, told Mubasher.
He added that fluctuating oil prices as well as the entrance of the Saudi market as a competitor that will draw away foreign investments has increased pressure on UAE stocks in recent weeks.
The Dubai Financial Market (DFM) closed Wednesday in the red, recording its biggest decline since January and its highest losses in 2015 amid intensive selling on leading stocks. The DFMGI nosedived by 126.11 points or 3.57% to 3,408.18 points, going further below the level of 3,500 points.
The Abu Dhabi Securities Exchange (ADX) also dropped at the closing of the session amid a semi-collective decline of its sectors, led by banking and energy and coinciding with growing fears regarding increased global oil supply. The index dropped 50.56 points or 1.17% to 4,280.07 points, its lowest level in 65 sessions.
The energy sector noticeably pressured local markets, despite its fairly lower weight compared to the other sectors on the ADX, Aggag told Mubasher, adding that declines on the banking and real estate sectors have affected both markets.
Brent crude retreated to $53 per barrel on Wednesday, compared to Tuesday’s closing at $53.51 per barrel.
An absence of catalysts from local institutions has plagued UAE markets, Aggag noted, adding that investors’ fears are linked to TAQA’s financials amid the oil price decline. He noted that investors expect the stock to continue moving downwards until oil prices stabilise.
UAE markets have been moving sideways for the past two months, backed by promising dividends, but these distributions do not encourage investors to buy stocks, the analyst commented.
The analyst also said that the decline in stock prices following dividend distributions often causes a stock’s market price to decline more than the dividend yield.
Catalysts or investors could arrive if first quarter financials, soon to be announced, beat analysts’ expectations, Aggag said.
Strong competition has come from the Saudi Stock Exchange (Tadawul), which this year decided to allow foreigners to own or directly invest in listed stocks, drawing strong liquidity, particularly from foreign investors, Aggag noted.
