Stock Dubai Financial Market TRADERS DFM
The ex-dividend factor is in play as key stocks lost some of their value. Image Credit: Virendra Saklani/Gulf News

The Abu Dhabi and Dubai equity markets dropped more than 1 per cent in early Thursday trades as key stocks trading ex-dividend came under heavy selling pressure.

Abu Dhabi Securities Exchange was 1.2 per cent lower at 5,676 points with telco Etisalat posting its biggest single-day loss in a year by skidding 4.2 per cent on ex-dividend date. The stock lost Dh0.9, which comes nearly in line with the recently pledged dividend of Dh0.8.

It announced last month to pay 40 fils a share as special dividend in addition to the same amount for the second-half of 2020. The company has already paid 40 fils for the first-half .

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Ex-dividend is no weakness

ADNOC Distribution also dropped, by 2.3 per cent, losing Dh0.1 of its value, which almost equals the dividend it declared. Company shares generally drop in proportion to their latest declared dividend payouts as purchasing those stocks on or after ex-dividend dates do not qualify investors to receive the newly announced payments.

But the slide, in no way, reflects that investors are worried about the current and future performance of these companies. It rather marks a technical correction as the dividends are already priced in, and when the stocks trade without those payouts, they naturally lose the value that reflects the promised amounts.

Saudi Arabia's benchmark remained largely flat on Wednesday, closing 0.27% lower at 9,464.08 points. Wednesday’s closing was the lowest this week, with the price testing intraday 21-day exponential moving average near 9,412.12

- Kaia Parv, Head of Investment Research, FXPrimus
Suez-sized impact
Price action on the Saudi Tadawul market is impacted by the large container ship stuck in Suez Canal, according to an update from FXPrimus.

"The blockage caused by 'Ever Given is likely to disrupt global supply chains that have already been under pressure in post-pandemic recovery, should the ship remain stranded," said Kaia Parv, Head of Investment Research at the firm.

"Halted economic activity and a pause in global trade have been testing the resilience of logistics infrastructure. Post-pandemic surge in e-commerce sales and increased oil demand have added to the dislocations in the market.

"Lastly, a number of companies that had depleted inventories in 2020 due to economic uncertainty, are witnessing high demand and reverberating that across the supply chains, causing a so-called ‘bullwhip phenomenon’."

Lender weighs on trade

Dubai Financial Market headed lower by 1.2 per cent to trade at 2,484 points, mainly weighed down by Dubai Islamic Bank, which slumped 4.4 per cent as the stock traded without entitlement to its latest dividend handouts. Some weakness was also seen in real estate stocks, with Emaar Properties and Emaar Development trading lower, coming under pressure from pessimism over renewed lockdowns in Europe and elsewhere.

Qatar Exchange displayed a muted performance, with banking and material stocks moving in opposite directions. Qatar Commercial Bank advanced 1 per cent, but Mesaieed Petrochemical shed 2.2 per cent as the stock went ex-dividend.