Dubai's index fell to a 3-month low on Sunday, on disappointment after a delay on a possible index upgrade, and Egypt's bourse fell after the government turned down a $3 billion IMF financing package.
Dubai's benchmark slipped 1.1 percent to its lowest close since March 22, extending losses since index compiler MSCI postponed to December a decision on whether to upgrade the UAE and Qatar indexes to emerging market status.
"Sentiment was up in anticipation of (a) UAE upgrade but when that news was cleared out, there's not much left for retail traders to hold these stocks, who were the major contributor to the market upside," said Musa Haddad, head of MENA equity desk at National Bank of Abu Dhabi.
"Volumes are relatively high on the selling side, so the market is in a consolidation phase," Haddad said, adding the index was likely to extend declines.
Most Dubai stocks dropped. Bellwether Emaar Properties fell 2 percent, Dubai Financial Market eased 1.7 percent and Arabtec lost 2.4 percent. Emirates NBD bucked the downbeat trend, rising 0.7 percent after Sheikh Ahmed bin Saeed al-Maktoum became the bank's chairman. Egypt's index fell 0.8 percent as institutional investors pondered whether the decision to turn down a $3 billion financing package offered by the IMF was a vote of confidence in the economy or a sign of confusion over policy.
The government last week revised its 2011/12 budget to show a lower deficit and te finance minister said Egypt no longer needed loans from the IMF or the World Bank for the time being.
"Blue chips are in low volume. Institutions are still on sidelines and are quite cautious about this news," said Mohamed Radwan, head of equities at Pharos Securities.
"For now, retail investors seem to be taking this positively, as a show of national pride - that we can do this on our own without help from abroad," said Radwan. Real estate developer Talaat Moustafa lost 3.2 percent. Orascom Construction dropped 2.1 percent.
The Saudi index rose for a second day as investor optimism about earnings outweighed concerns over global markets.
The euro and global stocks slid on Friday as concerns the Greek parliament may not approve austerity measures next week- crucial for securing more bailout funds, weighed.
"What's happened in the global markets is really concerning, but why we did not correct is because we expect very good earnings for (the) second quarter," said a Riyadh-based fund manager on condition of anonymity.
The benchmark gained 0.9 percent, but is down 3.3 percent in June. Saudi Basic Industries Corp rose 1.2 percent and Saudi Kayan Petrochemicals gained 1.7 percent. The two main sectors, petrochemicals and banking advanced 1.3 and 0.2 percent respectively.
"After this, the hype will go and what you're left with is global concern. If we lose or have concerns on demand for petrochemical, our market cannot sustain," the fund manager said. Second-quarter earnings will trickle through within the next two weeks. Oman's index ended 0.1 percent higher, as Bank Sohar gained 1.4 percent.