Egypt's bourse extended its rally on Tuesday after the government put on hold a capital gains tax, while Gulf markets were mixed as oil prices softened. The Cairo index rose 0.9 percent to 8,878 points, a seven-week high, after surging 6.5 percent in the previous session.
The government on Monday froze plans for a 10 percent tax on capital gains for two years, reversing a central component of its economic reform agenda that investors had criticised. It kept in place a 10 percent dividend tax.
The tax had been one of local investors' main concerns since early April, when the government published bylaws detailing its introduction.
The exclusion of Telecom Egypt from MSCI's emerging markets index this month sparked another sell-off in Cairo, because of fears that MSCI might eventually drop Egypt from the benchmark completely.
But the tax decision may indirectly address the MSCI concern as well, because with the new levy put on hold, market capitalisation and liquidity of key Egyptian companies appear less likely to fall below MSCI's thresholds.
The Cairo index has now risen above technical resistance at 8,860 points, this month's previous peak; any clean break, confirmed by two straight daily closes, would trigger a minor double bottom formed by the April and May lows and pointing up to around 9,400 points.
However, the benchmark closed well off its intra-day high of 9,040 points on Tuesday, and some stocks pulled back after the initial surge. Telecom Egypt was one of the biggest losers, tumbling 5.5 percent. Passive funds are likely to sell the stock en masse at the end of this month because of its exclusion from MSCI's emerging market index.
Saudi Arabia's stock benchmark was nearly flat as petrochemicals heavyweight Saudi Basic Industries fell 1.1 percent.
The price of Brent oil, which affects the prices of petrochemicals, fell below $66 per barrel on Tuesday as slow economic growth and high supplies meant that markets remain oversupplied.
But oil shipper Bahri jumped 3.2 percent after reports that Saudi Arabia's crude exports had risen in March to their highest level in almost a decade.
Dubai's index continued its rebound from strong technical support in the 4,000 point area and rose 1.4 percent to 4,127 points.
Developers Emaar Properties and DAMAC dominated trading volumes, climbing 2.4 and 5.9 percent respectively. Dubai's index faces minor chart resistance at its April peak of 4,253 points.
Abu Dhabi's bourse was mostly positive and edged up 0.5 percent. Union National Bank, which dropped last week because it had not been included in MSCI's emerging markets index as hoped, recovered and jumped 3.9 percent.
Qatar's bourse slipped 0.1 percent as Ezdan Holding and Qatar Insurance remained volatile after surging on their inclusion in the MSCI index last week. Ezdan rose 3.0 percent but Qatar Insurance fell 1.3 percent.
Oman's bourse inched up 0.1 percent and United Finance rose 1.6 percent after Al Omaniya Financial Services on Tuesday confirmed its interest in bidding to acquire United Finance.