DFM Slump
The positives on both fundamentals and technicals are showing up on UAE market indices. Image Credit: Gulf News Archive

Dubai: Abu Dhabi’s Taqa (Abu Dhabi National Energy Company) crossed the Dh 100 billion market capitalization mark with shares rallying by 1.81 per cent for the day. Currently, its capitalization stands at Dh 101.19 billion.

Taqa, the third largest company in the UAE after Etisalat and First Abu Dhabi Bank, is a powerhouse just by virtue of the assets it holds. The management has plans to increase the free share float, and this should increase the scrip’s weightage on ADX.

Even though the merger with ADPower’s assets created a behemoth, due to the free float norm of ADX, the weightage of the company on the index is below 1 per cent.

In the free float methodology, the number of shares readily available in the market is used for computation of weightage. Currently ADPower owns 98.60 per cent of the entire issued share capital of Taqa, and these shares cannot be used for weightage calculation in the index.

Once more members of the public own these shares, it can alter the current composition of ADX and make it more diversified. FAB and EITC with 39 per cent and 25.76 per cent weightage are currently the largest components on ADX, making more for heavy concentration.

Taqa with its ADPower has a virtual monopoly in Abu Dhabi’s utility space and the shares should attract a new class of investors.

The 100-day average

On the charts, DFM and ADX crossed a major milestone with both of them closing above the 100-day moving average. Currently, both of them are above the 50- and 100-day simple moving average, which indicates short-term momentum.

For the last two months, DFM and ADX were trading between the 50-and 100-day simple moving averages on the charts, and the strength is further corroborated by improving fundamentals.

Meanwhile, at the macro level, the UAE’s non-oil sector has shown growth for the first time this year with IHS Markit’s UAE Purchasing Managers’ Index (PMI) rising to 50.4 in June from 46.7 in May. A number above 50 indicates expansion.

China’s markets also are showing strength with the media getting behind investors to buy shares. Strong global cues and technicals, should help UAE markets to rally this week.