UPDATE 6: Saudi index closes lower as bank stocks weigh on Q4 results.
Arabtec led Dubai's index lower for a second day as investors continued to sell the stock after it agreed to sell a majority stake to Aabar Investments in deal that will dilute existing holdings.
Arabtec fell 3.4 percent to AED2.60, while Aabar dropped 2.8 percent, having gained 11 percent in the previous two days.
"It will be difficult to find someone who doesn't see the deal as a very good deal for both companies, on the medium to long run," said Mohammed Yasin, Shuaa Securities chief executive.
"In the short term the share prices will fluctuate with the market (until the deal is approved by Arabtec's board and the UAE regulator) especially on Arabtec as it the company being bought."
According to the $1.7bn deal, Aabar will pay 2.30 per Arabtec share.
"I believe that long-term investors and fund managers will be trying to accumulate this share gradually, but rather more aggressively if it gets closer to that price," Yasin added.
Arabtec is forecast to make a fourth-quarter net profit of AED172m ($46.83m), according to analysts polled by Reuters, down 7 percent from the year-earlier period.
Dubai's index dropped 0.6 percent to 1,803 points. Drake & Scull slipped 2.2 percent and Emaar Properties lost 1 percent.
Abu Dhabi's benchmark ended lower for the first session in three, slipping 0.2 percent to 2,775 points as volumes slip to a week-low.
Saudi Arabia's index ended lower for a second day as disappointing banks results weighed on the sector's stocks.
Saudi Hollandi fell 3.8 percent after reporting a fourth-quarter loss, while Banque Saudi Fransi dropped 3.6 percent as its quarterly profit missed analysts' forecasts, with both lenders blaming increased provisions for their performance.
Samba Financial Group slipped 1.8 percent after its fourth-quarter profit inched up 1.1 percent, but came in below estimates.
The above trio were all affiliates of foreign banks, spurring investors to also sell SABB, formerly known as Saudi British Bank, which dropped 3.2 percent.
The index fell 0.4 percent to 6,291 points.
Saudi Fertilizers Co (Safco) fell 1 percent after reporting a drop in fourth-quarter profit.
Saudi Basic Industries Corp (SABIC), which owns a 43 percent stake in Safco, also fell 0.6 percent.
Kuwait's index ended lower for the first session in three as volumes fell by a quarter from the day before.
Bluechips were subdued, with the three largest stocks ending flat. Commercial Bank rose 3.2 percent on slight volumes.
Agility climbed 1.6 percent, its second straight gain since saying a US court case had been delayed until late January. Agility stands accused of defrauding the US Army and is down 40 percent since charges were brought in mid-November.
"There's no clear explanation from the company about the financial impact of the court case, so investors are very cautious," said Ammar Hajeyah, assistant vice-president at Global Investment House.
He says investors wanted to know whether Agility's capability to win contracts with the US government will be harmed by the court case.
The index fell 0.2 percent to 7,048 points.
Bahrain's measure made its largest gain for a month, rising 0.8 percent to 1,464 points.
Qatar Real Estate (Alaqaria) ended higher for a second day after agreeing terms for a merger with Barwa Real Estate, but the latter was down.
According to the deal terms, each Alaqaria share will be exchanged for 1.1 Barwa shares, so the two stock prices are adjusting to this ratio.
"Investors will play on this information, buying Alaqaria as it goes up, then selling their holding to buy Barwa -- there will be a lot of speculation until the merger is completed," said Hani Girgis, assistant chief dealer at Dlala brokerage.
He warned Alaqaria could fall sharply as buying demand wanes, with the stock's 15 percent, two-day surge too sharp to build support levels on the way up.
Alaqaria climbed 7.9 percent to 32 riyals, while Barwa fell 32.20 riyals.
The index fell 0.4 percent to 7,005 points as nine of the 10 largest stocks retreat.
Oman's index ended higher for the 13th session in 14, although gains were slight as investors cashed in recent bank gains.
Bank Muscat fell 1 percent and Bank Dhofar dropped 3.7 percent.
"The market was up 30-40 points, but then gave most of this away in profit-taking, which is healthy after going up for a few days," said Sayed Quadry, vice-president of business development at Amwal Investment in Muscat.
The index edged up 0.1 percent to 6,605 points to a fresh 11-week high.
"The market should go up by at least 10 percent over the next two months unless there is some bad news and any correction should be seen as an opportunity to buy," Quadry said.
Raysut Cement was the main support, climbing 3.5 percent, while Renaissance Services added 1.3 percent.
Oman Cables fell 2 percent after an early-year surge, while Oman Cement was unchanged.