Perhaps investors should book profits where they can this week as analysts predict regional markets will remain subdued on depressed volumes in a tight range. The threat of a double-dip recession and fresh hints emerging from the US Fed that new stimulus measures may be needed has added to negative investor sentiment across the region.
Investors are also weighing the possible impact of reduced US consumer demand on the Chinese economy which relies heavily on exports to the US market, while a weakening in the price of crude in the second half of last week has emerged as another concern. "I suspect we won't see any change in the depressed market volumes that we have been seeing for the past few weeks. Ramadan will make it only more slower and at best we should expect sideways trade,' said Ali Khan, the managing director and head of equities at the investment bank Arqaam Capital.
The UAE markets have been among the worst hit in terms of the decline in trading activity. On the Abu Dhabi Securities Exchange (ADX), the average daily trading volume this year has been about 66 million shares compared with 149 million last year, while on the Dubai Financial Market (DFM) average daily volumes have dropped close to 170 million from 445 million. On Wednesday, the first day of Ramadan last week, traded volume on the DFM was 75 per cent lower than this year's average daily volume, pointing to trading activity levels that investors should expect.
But at least the reduced trading volumes have prevented major price declines. Regional markets posted modest declines on low volumes, managing to avoid big downward slides such as those witnessed in the US and on Asian markets. Nour al Zoubi, the general manager at MacSharaf Securities in Dubai, is optimistic about the UAE bourses producing some gains early this week. "We know volumes will remain low but we expect the markets to show some strength ? We expect to see property stocks move up and that will support the markets," he said.
In Abu Dhabi, Aldar Properties was down 10 per cent for the week, dropping to its new 52-week low of Dh2.05. Its relatively smaller competitor, Sorouh dropped 7.6 per cent, hitting multiple 12-month lows, to close the week at Dh1.57. Mr al Zoubi said institutions were wary of entry in low liquidity conditions, but the slight rise in markets did provide a chance for investors to book quick margins or "stop-loss" if they had been holding shares in the short-term.
Another event on investors' radars will be Aabar's extraordinary general meeting today to officially cancel the company's shares, a vital step for the Abu Dhabi Government-controlled company to become private. It is majority-owned by International Petroleum Investment Company (IPIC). Elsewhere, Mr al Zoubi said large-cap petrochemical stocks in Saudi Arabia could be a likely target of a sell-off because of the softening in crude prices last week while foodstuff and retail companies were likely to gain on account of Ramadan shopping rush.
Faisal Hassan, the head of research at Global Investment House in Kuwait, however, disagrees on the likelihood of Saudi equities falling in tandem with oil prices. "If you look at the five year correlation between Tadawul and oil prices, the relation is not as hyper as you would expect, but that's what the numbers are telling," he said. "We may see a spike up or down in a particular stock but no major trade activity is expected this week as investors are staying away for Ramadan."
He added that investor attention would focus on the Kuwaiti market which was lagging in corporate earnings. "It will help us gauge the correct picture in the market," he said. The UAE markets were significant under-performers last week, with the DFM benchmark index declining 2.7 per cent to 1,472.09 while the ADX index declined 2.3 per cent to 2,471.70. The ADIB Islamic Index, which tracks the publicly traded Sharia-complaint firms in the UAE, fell 3.2 per cent last week.
The Saudi bourse, which trades from Saturday to Wednesday, lost 1.7 per cent last week, and another 1.8 per cent yesterday, finishing at 6079.4. Kuwait shares recorded marginal gains to close the week at 6,671.20 while Qatar's main measure ended its winning streak, ending 0.9 per cent lower at 7,064.50. Muscat's main index was off 0.6 per cent at 6315.99, while Bahrain shares have risen half a per cent to 1409.38.