Most stock markets in the Gulf fell on Sunday as investors booked profits after a particularly strong week and Saudi Arabia's Al Rajhi Bank published first-quarter earnings that missed analysts' estimates. Dubai's bourse retreated 1.7 percent to 4,759 points after gaining 4.8 percent last week on a relatively light news flow and with most first-quarter results yet to come.
Heavyweight Emaar Properties contributed most to the decline, sliding 2.9 percent to 10.20 dirhams. Shares in most property and construction companies also dropped.
"I think basically it is profit-taking," said Sanyalak Manibhandu, manager of research at NBAD Securities. "DFM made four new 12-month highs last week - it was really pushed up on not much news."
A negative global environment might also have contributed to Sunday's weakness, he said, as equity markets across the world declined on Friday and Ukraine reported deaths after its security forces clashed with pro-Russian separatists on Sunday.
Dubai, along with Abu Dhabi and Qatar, will enter MSCI's emerging market index at the end of May from the frontier benchmark. This has helped drive stocks up: Dubai's index has gained 41 percent this year and the two other markets have added about 20 percent each, making them the three top performers in the Gulf.
But exchange data shows large inflows of foreign money into some of the biggest stocks to be upgraded have already happened, and it is not clear how much more money will come. Some active foreign investors may have been buying stocks merely to sell them to the passive investors who are expected to enter on the eve of the MSCI upgrade, and who are expected to produce only small volumes of funds.
"People are now looking ahead, saying: after the MSCI upgrade, what happens next? And what is going to happen next is profit-taking," Manibhandu said.
Some investors "are waiting for positive results to come through before they do anything else," he added. Most companies in the Gulf will report their first-quarter results in coming weeks, although a handful have already published them.
Shares in Dubai investment bank Shuaa Capital rose as much as 5.3 percent on Sunday after the firm reported a first-quarter net profit of 8.2 million dirhams ($2.2 million), a big swing from a loss of 5.9 million dirhams in the same quarter last year. But the shares then pulled back sharply to close at 1.72 dirhams, up just 0.6 percent.
Abu Dhabi's bourse edged down only 0.2 percent as some of the bigger names dodged the profit-taking bout. At 5,163 points, it remained just above its 2008 peak of 5,159 points, which it surpassed last week.
Aldar Properties rose 3.9 percent to 4.26 dirhams and Abu Dhabi Commercial Bank added 0.6 percent to 8.20 dirhams.
Qatar's bourse, on the other hand, slid 1.4 percent to 12,225 points with losses across the board after it hit a six-year high on Thursday. Trading volume fell significantly compared to the previous two sessions.
Saudi Arabia's main index also declined, continuing last week's downtrend, and closed down 1.1 percent at 9,425 points.
Al Rajhi Bank was the main drag, tumbling to a five-week low after the kingdom's largest listed lender posted another sharp drop in quarterly profit.
Al Rajhi said on Sunday it made a profit of 1.71 billion riyals ($456 million) in the three months to March 31, down 16.9 percent from 2.05 billion riyals in the same period a year earlier.
Analysts had expected roughly flat earnings; the drop, which contrasted with solid first-quarter earnings by several other Saudi banks, was apparently due to higher bad loan provisions. The bank's shares fell 3.0 percent, slumping to their lowest level since March 6.
Saudi Arabia's bourse, which remains largely closed to foreigners and will not be upgraded along with Qatar and the United Arab Emirates, has lagged them this year, adding 10 percent.
The planned initial public offer of National Commercial Bank (NCB), the kingdom's largest lender, later this year may also have contributed to the weaker performance, said Manibhandu from NBAD Securities.
Bankers estimate a deal size of between 15 billion and 20 billion riyals ($4 billion-5.33 billion) and some investors may be anticipating a sell-off in other shares to raise money for the IPO.
"There will be a drain," Manibhandu said. "Everybody will have to buy NCB."
SUNDAY'S HIGHLIGHTS: Dubai index fell 1.7 percent to 4,759 points; Abu Dhabi index edged down 0.2 percent to 5,163 points; Qatar index slid 1.4 percent to 12,225 points; Saudi Arabia index eased 1.1 percent to 9,425 points; Egypt index fell 0.3 percent to 7,875 points; Kuwait index slipped 0.2 percent to 7,560 points and Bahrain index edged down 0.1 percent to 1,380 points.