Dubai: The UAE equity markets may witness some weakness before stabilising next week as margin calls unwind after the main index shed more than 7 per cent in the previous two sessions, industry participants said.
The Dubai Financial Market General Index closed 2.23 per cent lower at 4,186.11, after losing 4.74 per cent on Sunday weighed by falling crude oil.
“There could be selling pressure on Thursday. Many margin calls have been initiated in this market after the drop on Sunday and Monday. The process of margin calls to unwind will take a few sessions. Market will be able to absorb selling pressure for atleast 3-4 sessions before we can stabilise,” Mohammad Ali Yasin, managing director at NBAD Securities told Gulf News.
The market has been on the boil after producer group Opec decided to maintain its output at 30 million barrels per day.
Opec signalled it won’t adjust supply to influence prices, instead preferring to maintain market share amid the unprecedented shale boom.
Benchmark oil prices have plunged 40 per cent from a June peak, the worst decline since the collapse of the financial system in 2008. That’s threatening to have the same global impact of falling prices three decades ago that led to the Mexican debt crisis and contributed to the end of the Soviet Union.
The speculative net-long position, or bets on rising prices, in US crude futures tumbled 51 per cent since June, as investors lost faith in Opec’s willingness to act. Short positions expanded more than threefold over that period.
Encouraging signs:
“There were encouraging signs that the market was calming down today and it was not like yesterday because people didn’t panicked and sold everything on limit down of Emaar Properties shares. Some shares actually appreciated from yesterday that gives me hope that we may see some stability in coming sessions,” Yasin said.
Sunday was the record date to qualify for Emaar’s special dividend of 1.257 dirhams per share, which is linked to the initial public offering of subsidiary Emaar Malls Group in October. Emaar Properties ended 10 per cent down to be at Dh9.54 per share.
“I see Emaar stabilising. We may see banking stocks and good yielding stocks in demand like Emirates NBD. If we get the stability that would give signal for the buy side to build positions again that could help the market to stabilise,” Yasin added.
The UAE banking sector, the largest in the region posted an asset growth of 10 per cent for the first nine months of this year to Dh2.31 trillion. Banking sector assets increased by an annual average of about 6 per cent during 2010-2013.
