UPDATE 3: Reports of go ahead for Indian JV pushes stock 5.4%, Abu Dhabi up.
Emaar Properties surged to a seven-week high after reports India's market regulator has given the go ahead for Emaar's Indian joint venture to launch an initial public offering, helping Dubai's index rally for a second day.
Emaar climbed 5.4 percent to its highest finish since January 20.
"Investors believe it's cheaper to buy Emaar through its Dubai listing than through the IPO," said ASAS Capital chief investment officer.
Although details are sketchy, investors are betting they will benefit from an IPO windfall, McKinnon said.
"There's now a real investment play and we might see a rally for a little bit longer barring any susbstantial negative news hitting the market," added McKinnon.
A late surge enabled Arabtec to add 2.8 percent and Dubai Financial Market to rise 3.5 percent.
The index climbed 1.7 percent to a four-week high of 1,649 points. Volumes hit a two-month high.
Abu Dhabi's index hit a two-month closing high, buoyed by talk Dubai World's restructuring plan is imminent, and broad regional gains.
The index climbed 1 percent to 2,774 points, its highest finish since January 10. Volumes also hit a two-month high.
With expectations rising that Dubai World's $26 billion debt restructuring will not be as punishing to creditors as feared, UAE banks are resurgent. National Bank of Abu Dhabi climbed 4.5 percent and Abu Dhabi Commercial Bank rose 4.7 percent.
The cost of insuring Dubai's debt against default fell and Dubai World subsidiary Nakheel's 2011 bond rose on Monday.
Aldar Properties climbed 2 percent to 3.65 dirhams.
"Abu Dhabi had been under pressure for the past week, with foreigners selling Aldar, but the stock has managed to find some firm ground around 3.30 dirhams," says Ahmed Hamdi, Senior relationship manager at Prime Emirates.
"If more volumes come in it can target 3.80 dirhams."
National Bank of Kuwait slid after its board approves a 10 percent capital hike in a move that will be dilutive to existing shareholders, weighing on Kuwait's index.
NBK dropped 1.7 percent to 1.14 dinars. The rights issue is priced at 0.5 dinars per share and will raise $113 million, according to Reuters calculations.
The capital hike has yet to be implemented and so NBK's share price has not been adjusted.
Other lenders also struggled, with Kuwait Finance House slipping 1.6 percent and Gulf Bank losing 1.3 percent.
The index fell 0.4 percent to 7,386 points.
"Trading was mostly focused on small cap names that are relatively cheap, which is a speculator's game," said a Kuwait-based analyst who asked not to be identified.
The five most active stocks ended at between 0.07 and 0.16 dinars. Zain, the largest listing, ended flat at 1.28 dinars.
Qatar's index made its largest gain for 12 weeks as gains on world markets helped Doha rebound.
The benchmark climbed 1.9 percent to 6,855 points, its first's day's trading since Thursday following a long weekend. It fell 1.7 percent in the preceding two sessions.
"What Qatar buyers needed was a confirmation from the global economy, and specifically the US economy, about the prospects for a recovery," said Mohamed Abu Ghoush, head of equities brokerage at Ahli Bank.
"There is a strong correlation between signs of a global recovery and Gulf equities."
Industries Qatar climbed 2.4 percent, Commercial Bank of Qatar added 5.6 percent and Qatar National Bank rose 1.4 percent.
"Some Qatar companies have proposed generous dividends and that will support the market in the coming weeks," added Ghoush.
Oman's index ended lower for a third session in four, with investors booking profits to reinvest in high dividend yield stocks, while an agreement on Dubai World's debt restructuring could trigger a rally.
Bank Muscat climbed 1.2 percent, but National Bank of Oman dropped 0.9 percent and Raysut Cement lost 2.1 percent.
"There was some profit taking after yesterday's rise and the market is still weak, with a lack of volumes," said Adel Nasr, United Securities brokerage manager.
"People are still exiting cash to then reinvest in high dividend yield stocks over the next week to 10 days."The index slipped 0.1 percent to 6,673 points.
"Oil prices are at excellent levels and the global economy is looking good, but we're still very much affected by Dubai and if an agreement is reached about Dubai World I believe the Oman market will strongly rebound," added Nasr.
In November, government-owned Dubai World asked for a standstill as it tries to restructure multi-billion dollar debts, with an announcement expected in March. (Reuters)