Abu Dhabi: The Dubai Financial Market (DFM) index fell on Monday just hours before the anticipated announcement of Saudi Arabia’s budget for 2016 that is expected to include deficits on the back of lower oil prices.

The DFM index dropped 1.31 per cent at the end of the day’s trade at 3,119.4, reaching a low of 3,104 just an hour before the market closed.

Liquidity was also significantly low, reaching just Dh228.7 million, most of which went into selling activity as share prices plunged.

Vijay Harpalani, fund manager at Al Mal Capital, said that many investors chose not to trade and stay on the sidelines ahead of the announcement from Saudi Arabia.

“In the UAE, Dubai’s budget was announced yesterday [Sunday], but I think most people were looking forward to Abu Dhabi’s budget rather than Dubai’s. Although the budget was positive and balanced, with higher spending compared to last year, investors chose to stay on the sidelines before the Saudi budget announcement,” he said.

On Sunday, His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, approved a Dh46.1 billion budget for the emirate in 2016. The zero-deficit budget marks a 12 per cent increase over the Dh41.2 billion of 2015.

Harpalani said that the Dubai budget announcement was not enough of a catalyst for the market as investors are keener on getting direction on oil prices and the breakeven price, which would come out of Abu Dhabi not Dubai.

He did not expect any major catalysts in the market before February, which is when companies start announcing their financial results for the fourth quarter of 2015.

“I think markets have been more correlated to oil prices, so even though valuations appear to be attractive, you have to also consider the potential risk of any downgrades in 2016. Adjusting for that, valuations may not look that attractive because there are a lot of companies where we don’t see high growth in 2016,” Harpalani said.

Looking at 2016, he expected oil markets to continue to cast a major shadow on investor sentiment along with other factors like geopolitical tension and the uncertainty on Chinese economy.

“Another concern is the direction of monetary policies here in the GCC because we have to maintain the peg [to the dollar]. The fiscal policies are also key because government spending will probably be curtailed so a good balance between monetary and fiscal policies will help,” Harpalani said.

In Dubai, Arabtec continued to top the market in terms of traded value, accounting for 29 per cent of total value. Its share prices, much like those of most other companies, dropped 3.15 per cent.

Meanwhile, Gulf Finance House fell 4.12 per cent, Emaar slid 1.56 per cent, Dubai Islamic Bank ended 0.33 per cent lower, and Islamic Arab Insurance (Salama) declined 1.75 per cent.

Tabreed jumped 10.9 per cent, however.

On ADX, Commercial Bank International topped the gainers’ list for a second day in a row with a 14.91 per cent jump, almost reaching the 15 per cent daily cap.

It was followed by Invest Bank with a 14.44 per cent increase, Sharjah Cement and Industrial Development with nine per cent, Abu Dhabi National Hotels with 6.3 per cent, and FoodCo Holding with 5.26 per cent.

Of the 33 stocks traded on DFM, 22 went down, 10 went up, and one remained unchanged. Of the 29 stocks traded on ADX, 11 declined, 14 advanced, and four remained flat.