By: Mahmoud Gamal
Mubasher: There are five main factors for the current weak performance of the UAE’s stock markets, topped by investors’ concern over a possible global trade war alongside the growing interest in digital currency investment, analysts told Mubasher.
On Monday, the Abu Dhabi Securities Exchange’s (ADX) main index inched up 0.11% with a total liquidity of AED 135.744 million, while the Dubai Financial Market General Index (DFMGI) edged down 0.17% with a turnover of AED 310.65 million.
Last week, US President Donald Trump announced that the US would impose tariffs of 25% on steel imports and 10% on imported aluminum.
The US bourses
The steep drop in the UAE stock markets’ liquidity has been a recurring matter, which may propel traders to hold on their shares and postpone sale or purchase deals, former CEO of Adaa Financial Services Aly Alhamody said.
The volatility at the global bourses in general, and the US stock markets in particular, has taken its toll on the local markets’ liquidity, Alhamody added.
He affirmed that attracting further liquidity to the local equity markets this week to resume the upward trend poses the biggest challenge.
Listing new firms and increasing companies through the secondary market are key factors to lure fresh liquidity, especially foreign inflows, the financial analyst noted.
In February, Mubadala CEO revealed plans to list a stake of Emirates Global Aluminium on the Emirati bourses.
Moreover, MAG Property Development is considering going public on the DFM within the coming three years, CEO Talal Moafaq Al Gaddah stated.
Digital currencies
There is a change in local traders’ behaviour as they are heading to invest in the international markets, Forex trading, digital currencies, and commodities on the back of their larger revenues, economist Bassel Abou Teiama said.
The outflow of investments from shares to cryptocurrencies, such as bitcoin, is one of the major elements that slashed the UAE bourses’ liquidity since the beginning of 2018, Abou Teiama added.
He noted that the bourses’ current downtrend was attributed to speculations and the volatility of some shares.
Over the current period, the UAE stock markets did not see any transactions in the banks sector or the entry of foreign portfolio that would boost liquidity, the economist said.
The Securities and Commodities Authority (SCA) must impose further regulations to tighten control on deals that adversely impat the stock markets’ movement to increase investors’ confidence, he noted
The present decline in the UAE stock markets also was attributed to oil price instability, the trend of global bourses, firms’ performance, and overseas investment movement, financial analyst Zeyad Eldabas said.
As for the performance of the UAE bourses in March, Eldabas said that it is difficult to predict shares’ trend due to the lack of new market-boosting catalysts.
Negative indices
From a technical perspective, the closure of the UAE's stock markets was negative in February, financial analyst Ahmed Elzohory stated.
Dubai Islamic Bank’s stock may return to the main support level at AED 5 per share, Elzohory added, highlighting that Emaar Properties is still targeting new level instead of AED 5.99 a share.
As for DXB Entertainments’ stock, he said that since dropping from AED 1.55, the stock does not see any real sign to rebound, expecting the stock would continue the negative trend.
Translated by: Mohamed Hesham Azab
