UAE equities flat as investors await Brexit clarity

Analysts warn DFM index is near support levels that may trigger sell-off

Published: 17:03 June 28, 2016

Sarah Diaa, Staff Reporter

Abu Dhabi: After a volatile session on Sunday, some bargain hunting on Monday, the UAE’s equity markets were quiet on Tuesday as investors seemed to prefer staying on the sidelines until more clarity is provided.

Investors, economists, and policy makers across the world have been calling for exactly that — clarity — after Britain voted to leave the European Union. The Brexit brings plenty of uncertainty both on the political and economic fronts, and has already triggered panic selling in Europe and the US.

The Dubai Financial Market (DFM) index ended the day 0.06 per cent lower at 3,283.92, having traded in a range of just 30 points all day. The Abu Dhabi Securities Exchange (ADX) general index also fell 0.61 per cent to 4,407.16.

This comes after a plunge on Sunday when the DFM index fell as much as 4.7 per cent only a few minutes after trade began, bouncing back slightly on Monday to end 0.8 per cent higher.

The sideways movement on Tuesday comes as European stocks surged, with the FTSE 100 index up 2.5 per cent in early trade and the FTSE 250 index, which is more UK-centric, up around three per cent.

“I think the market [DFM index] will move between the range of 3,250 and 3,350, which is 100 points going up and down, until it finds a direction. Any news will increase the volume and increase the sell-off or buying activity. At the moment, the market continues to hold the 3,250 support level, so there’s no need to sell, and at the same time they’re not rushing to buy until things become more positive globally,” said Hisham Khairy, head of institutional trade at Mena Corp. Financial Services.

He said that until the DFM index reaches its resistance level of 3,350, there will also be no trigger to buy, with investors now on hold.

Analysts in UAE have pointed since Friday’s Brexit vote that the UK’s decision to leave the EU has no direct impact on the UAE. The negative sentiment among investors in Europe and the US, however, is what will impact UAE investors.

“I think things will continue to be very quiet in the UAE. Sentiment is more on the negative side, so there’s a higher probability for markets to break their support level and for us to start seeing increased volumes and selling pressure.

“The Eid holiday is also coming soon and there will be a long weekend, so the market will be pretty slow,” Khairy said.

In Dubai, share prices recorded marginal movements. Dubai Parks rose 1.28 per cent, Dubai Islamic Bank went up 0.8 per cent, and Arabtec remained flat. Emaar slid 0.16 per cent.

On ADX, Abu Dhabi Commercial Bank fell 2.29 per cent, Aldar Properties declined 1.48 per cent, while Agthia Group rose 3.08 per cent.

“Everybody’s expecting more sell offs and more weakness, so this is going to send our markets lower. The 3,250 level [for DFM index] is a very strong support, so if it is broken, it’s actually going to cause a big sell-off. If markets globally continue to sell off, we’re going to break that support and go strongly below it to reach the next support of 3,000 very quickly,” Khairy said.

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