Middle East markets were mixed on Tuesday as a regional rebound faltered, with little momentum to push stocks higher after they recovered most of their late-January losses that were sparked by unrest in Egypt.
"Egypt is a sentiment dampener for the region, but the fundamental impact is very limited," says Shahid Hameed, Global Investment House's head of asset management for the Gulf.
"People who invest in Egypt also invest in the Gulf. If you sell Egypt you would tend to sell Gulf stocks too - investors in New York or London made little differentiation between regional markets."
Saudi Arabia's index fell for a first session in six, easing from Monday's 12-day high.
"The market is moving sideways," said Hesham Tuffaha, Bakheet Investment Group head of research. "Egypt has had a negative impact on sentiment and many investors are now relying on foreigners to drive the market." Saudi Basic Industries Corp dropped 1.4 percent and Banque Saudi Fransi lost 1.8 percent.
"We will see more cash going out of Egypt and being reallocated to other Middle East markets," said Musa Haddad, head of MENA equity desk at National Bank of Abu Dhabi.
Saudi Arabia will the top destination for this money necause of its market depth, liquidity and strong economic fundamentals, Haddad said. Egypt's bourse is expected to reopen on Sunday.
Saudi's economy is forecast to grow 4.3 percent in 2011, only bettered by Qatar and Oman in the Gulf.
Egypt has a plan for the peaceful transfer of power, the vice president said on Tuesday, as protesters called more demonstrations to show their campaign to oust President Hosni Mubarak remains potent.
In Doha, Qatar National Bank climbed 3.4 percent, rebounding from Monday's 10-week low. Commercial Bank of Qatar also rallied, rising 2.3 percent.
Shares in conventional banks have been under pressure since the Gulf state's central bank instructed them to dispose of their Islamic banking operations by the end of 2011, although some analysts say this sell-off was an over-reaction. "In the long term, we consider the clear segregation between Islamic and conventional banks to be healthy," said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain.
Qatar Islamic Bank fell 1.8 percent, its second decline since Sunday's three-week high. It may buy the Islamic banking assets of local conventional lenders.
Qatar's index rose 0.7 percent to a 12-day high.
Dubai builder Arabtec climbed 0.6 percent after winning a contract worth $245 million in Kuwait, but the emirate's index ended flat.