Dubai's index hits a 34-month closing high as so-called "smart money" from foreign investors buys into the emirate's economic recovery.
Bluechips lead gains. Emaar Properties climbs 3.7 percent and top bank Emirates NBD (ENBD) surges 8.6 percent to a 14-month high.
Du, the third largest stock by market value after Emaar and ENBD, slips 0.6 percent. The telecom operator's shares are off-limits to foreign institutions.
"People have realised there is economic recovery in Dubai and at the same time we have more and more foreign money that wants to invest in emerging and frontier markets," says Sebastien Henin, portfolio manager at The National Investor.
"For the first time in ages we have smart money moving into the region - this is targeting the bluechips and in Dubai and Abu Dhabi you don't have so many quality names, so they are targeting Emaar, Air Arabia and Emirates NBD."
These foreign investors are wary of buying Abu Dhabi stocks because of uncertainty over the UAE capital's property sector, Henin says.
"There's more confidence in the revival of Dubai," he says.
Passenger flows through Dubai's main airport jumped 13.2 percent in 2012 to become the world's third busiest for international passenger traffic, airport authorities said on Monday, a bullish indicator for the tourism sector, which is one of the most important for the emirate's economy.
Dubai slid into recession in 2009 as a property bubble burst, but is now recovering, although it faces nearly US$50bn of debt maturities between 2014 and 2016, according to a Standard Chartered report in November.
Dubai's index climbs 1.8 percent to 1,853 points, its highest close since March 2010.
"The rally has been very strong and we should expect some profit taking in the coming days or weeks, but the recovery story will still be intact," says Henin.
"I don't think investors are buying for Q4 results - they have a long-term view."
Abu Dhabi's measure rises 1.2 percent to a 33-month high of 2,839 points.
Abu Dhabi Commercial Bank and Union National Bank , both favoured by dividend-seeking investors, add 1.8 and 2.3 percent respectively.