Risk on in Dubai bourse amid focus on smaller caps

Abu Dhabi: The UAE’s equity markets indexes moved less than one per cent on Monday, unaffected by the outcome of the Italian referendum, which ended with the resignation of the Italian Prime Minister Matteo Renzi.

The Dubai Financial Market (DFM) general index slid 0.27 per cent to reach 3,407.75, as trade remained concentrated on smaller cap stocks. The Abu Dhabi Securities Exchange (ADX) general index rose 0.92 per cent to reach 4,301.03.

In Dubai, 32 per cent of the Dh804.9 million in traded value went to GFH alone whose shares jumped 8.33 per cent amid a risk-on sentiment that sending investors away from defensive stocks and into high-beta ones. Shuaa also climbed 9.29 per cent.

The near-flat movement in the Dubai index comes one day after it rose 1.67 per cent on Sunday on the back of gains in oil prices after Organisation of Petroleum Exporting Countries agreed to cut oil production.

“The correlation between the Dubai market and crude is around 20 per cent, which is relatively low. Yes, both will probably move in the same direction but they won’t move in the same magnitude partly because the Dubai economy is not reliant on oil, although it [oil] does affect the macro picture for the UAE economy,” said Tariq Qaqish, managing director of asset management at Al Mal Capital in Dubai.

Dubai’s economy is mostly dependent on sectors like tourism, retail, construction, and real estate, among others rather than oil, he pointed.

“The Opec meeting is over, the US elections are over, so now, the uncertainty is clearing up. I think the main catalyst going forward will be the Q4 earnings and the dividends that companies will be disturbing in early 2017,” Qaqish said.

Though corporate earnings for the full-year 2016 don’t come out until mid- to late January, market expectations for the results tend to build up starting January 1, thus impacting trade.

From a liquidity perspective, Qaqish said he expected to see a change in investors rather than value.

“I think you will see more liquidity coming from medium- to long-term investors rather than speculators. You will see more foreigners coming back to the market… and more institutional funds accumulating before the end of the year, so liquidity will continue to be solid,” he said.

On ADX, Eshraq Properties topped the gainers’ list, with an 8.08 per cent, followed by Abu Dhabi Commercial Bank with 2.48 per cent, and FGB with 2.16 per cent.

Of the 35 stocks traded on DFM, 12 went up, 15 went down, and eight remained unchanged. Of the 23 stocks traded on ADX, 10 advanced, three declined, and 10 remained flat.