Investors to focus on earnings

Sellers are reluctant so buyers will have to pay a premium.

The Dubai Financial Market has been trading in a tight range for the past few weeks.

Regional markets made sizable gains last week and are expected to attract more attention as second-quarter earnings kick in. Although UAE bourses made some gains, some brokers argue the markets remain range-bound on low participation. "Looking at the index in recent weeks, the DFM [Dubai Financial Market General Index] has been trading in a very tight range between 1,460 and 1,500, more or less," said Hassan el Salah, the head of institutional trading at AlRamz Securities based in Abu Dhabi.

"No one is willing to sell into current prices and any buyer who wants to come into the market needs to pay a premium in order to take quantities." Mr el Salah said traders remained very selective because volumes had not trickled down to all stocks on the indexes. "Only specific names, not everything has gone up with the same percentage points," he said. "People are taking a look into quality names, where they expect improvement or visibility in the second-quarter earnings. We are limited in terms of what we can buy for value."

Volumes have bottomed and are expected to improve, albeit by very little. "There's still a lack of interest in the market, which is evident in the volumes," Mr el Salah said. "I don't expect a drastic improvement but I don't expect volumes to go any lower than this." Volumes traded on the DFM dropped as low as Dh50 million last week. Visibility would be a catalyst to push the markets up, said Mr el Salah.

Nakheel, the Dubai developer, made a payment to the contractor Arabtec Holding late last week. Arabtec shares rose 1.1 per cent per cent to Dh1.73 on Thursday. "The market didn't care, it was already priced in," Mr el Salah said. "Now investors are looking at its backlog feasibility and its receivables." Aabar Investments gave no further updates on its plans to delist from the Abu Dhabi Securities Exchange. Brokers have welcomed the company's plans to go private.

"Most of Aabar's traders, not investors, are speculators," Mr el Salah said. "Institutional investors need to know what the company is doing in order to trade their stock but transparency when it comes to management is not clear" The Saudi Tadawul All-Share Index rose 2.3 per cent to 6,200.26, yesterday. Saudi Arabian Fertiliser Company (SAFCO), reported a net profit of 907m riyals for the second quarter, almost double the 480m profit for the same quarter last year.

Ahmed al Qahtani, an analyst at NCB Capital, said the results were in line with expectations. SAFCO announced on July 3 that it would distribute a dividend of 6 riyals a share. Bank Riyad reported a net profit of 766m riyals for the second quarter, from 918m riyals for the same period last year. Saudi Hollandi Bank reported a net profit of 250.5m riyals, from 90.6m riyals last year. Almarai reported a net profit of 343.1m riyals, up 19.5 per cent from the same period last year. Saudi Research and Marketing Group, a newspaper publisher, reported a net profit of 35.3m riyals, compared with 10.7m riyals for the second quarter last year.

Almarai was active last year with its acquisitions across the region, said Farouk Miah, an analyst at NCB Capital. "The coming 12 to 18 months are set to be pivotal for Almarai in laying the foundations for its transformation from a local dairy producer to a leading regional food company," Mr Miah said. Qatar's bourse is expected to receive attention this week because of second-quarter estimates from Islamic Financial Securities, Qatar Islamic Bank, Qatar Insurance and United Development.

The QE Index rose 2.1 per cent to 6,910.18 last week. Elsewhere in the region, Oman's index jumped 2.5 per cent to 6,231.01. Bahrain's measure moved up less than 0.5 per cent to 1,366.29, while Kuwait's measure rose 1.7 per cent to 6,430.90. Wall Street ended its best week in a year on Friday, snapping back from a long stretch of selling, as investors looked ahead to what many expect will be a solid earnings season.

Stocks ended near the day's highs, but trading was thin. Only 6.19 billion shares were traded on the New York Stock Exchange, the American Stock Exchange and NASDAQ, making it the lowest-volume day of the year. Google helped lift the NASDAQ, rising 2.4 per cent to US$467.46 after Beijing gave the company the green light to continue operating its China internet search page. The US-listed shares of Baidu, a Chinese rival, fell 1.7 per cent to $71.20.

The major stock indexes advanced 5 per cent in the holiday-shortened week, as investors put a string of dismal data behind them to focus on what is expected to be another solid quarter for corporate results. "We expect to see good margins, very healthy balance sheets and companies basically saying that even with the slowdown, we are very well prepared for it," said Marc Pado, a US strategist at Cantor Fitzgerald in San Francisco.

"We have been seeing from previous data that companies are not building inventory and not adding workers. In other words, they are very well positioned for the worst-case scenario." The Dow Jones industrial average was up 59.04 points, or 0.58 per cent, at 10,198.03. The Standard & Poor's 500 Index was up 7.70 points, or 0.72 per cent, at 1,077.95. The NASDAQ Composite Index was up 21.05 points, or 0.97 per cent, at 2,196.45.

* with additional reporting from Reuters [e-mail]