x Abu Dhabi, UAEFriday 19 January 2018

Low volumes hang over stocks

Companies in region have to demonstrate growth to bring liquidity back, says analyst

Individual stocks may experience sharp swings again this week as a result of low volumes, analysts say. Dana Gas shares fell 6 per cent on Tuesday, while Sorouh Real Estate fell 4.4 per cent on Thursday. "There's nothing we can point to where a significant stock can fall to that magnitude. If someone has a couple million to sell on the stock in one day, it will have an impact, when volumes are so limited right now," said Ali Khan, the managing director of Arqaam Capital based in Dubai.

"There's lukewarm appetite to run risk on off-benchmark markets. We can see that with the way volumes remain low. It's not a UAE phenomenon or GCC phenomenon, it's a global phenomenon." Because banks and property companies, which make up the bulk of listed companies in the UAE, are facing their challenges, local bourses are unable to price in the current strength in oil. Investors are waiting to see earnings growth before buying again.

"Coming off the performance we saw back in May, a stable backdrop will be a driving force. But we need our companies in the region to demonstrate growth and to show that growth in second-quarter earnings in order to bring any meaningful liquidity back," Mr Khan said. The Abu Dhabi Securities Exchange General Index closed 0.1 per cent down to 2,515.39 for the week, while the Dubai Financial Market (DFM) General Index dropped 1 per cent to 1,498.91. The Abu Dhabi Islamic Bank MSCI Index, which tracks the performance of Sharia-compliant companies in the UAE, dropped 1.58 per cent.

Regional investors will be looking to the health of the banking system as a financial indicator moving forward. On the DFM, banking heavyweights closed up largely unchanged last week. Mashreqbank remained flat at Dh89.95. Dubai Islamic Bank rose 1.5 per cent to Dh2.03, the highest among Dubai banks for the week. In Abu Dhabi, the National Bank of Abu Dhabi rose the highest, climbing 3.5 per cent Thursday to Dh10.45.

Qatar's index jumped 2.2 per cent to 7,004 last week. Mr Khan said Qatari banks needed to demonstrate the material impact of the loan and deposit growth that they had seen this year. For Saudi banks, which have experienced weaker loan and deposit growth, analysts are watching to see how the trends affect bank profits. Saudi's Tadawul All-Share Index closed down 0.01 per cent yesterday to 6345.67.

Oil was up for the week, closing at US$77.18, as a weaker dollar helped stabilise commodities globally. Industries Qatar dropped 0.7 per cent to 102.40 Qatari rials. In Saudi Arabia, Saudi Basic Industries Corporation closed down 0.5 per cent yesterday to 91.75 riyals, while Saudi Arabia Fertiliser Company closed up 1.38 per cent to 128.75 riyals. Elsewhere in the region, Bahrain's measure remained unchanged for the week at 1,393.30 and Kuwait's measure dropped 0.8 to 6,583.10. Oman's index dipped 0.1 per cent to 6,110.71.