DUBAI - Banks helped Oman's index touch a 38-week high on Thursday as volumes also surged, with investors betting on a windfall for lenders from increased government spending.
Bank Muscat rose 1.3 percent, Bank Sohar added 2.5 percent and Bank Dhofar climbed 0.7 percent.
On Sunday, Oman said it will spend 30 billion rials ($77.92 billion) in a five-year economic plan to 2015.
"Banking and construction stocks are seen as the likely main beneficiaries of increased government spending," said Adel Nasr, United Securities brokerage manager.
The index rose 0.4 percent to its highest finish since April 15. More than 21 million shares were traded, the highest total for four months.
"The first couple of weeks of the year are usually very good on the Oman market as local asset managers and long-term investors build new positions, while there was also good buying from foreigners," said Nasr. "Volumes were very strong, but we expect these to fall next week ahead of Q4 results - earnings will determine market direction for the next two months."
Dubai's index rose 1.2 percent to a three-week high as real estate-related stocks rallied. Emaar Properties climbed 1.7 percent and Union Properties added 1.6 percent.
Dubai house prices have fallen about 60 percent from 2008 peaks as oversupply and a liquidity crunch sent valuations tumbling.
"The pace of property price declines has slowed and over the next couple of years there will probably be stability rather than a recovery -- there is a lot of supply on the sidelines which will come on the market at the first signs of demand recovery," said Majed Azzam, AlembicHC real estate analyst.
"This isn't such a bad thing and helps give Dubai a cost advantage, with neighbouring GCC countries (e.g. Qatar and Saudi Arabia) seeing high levels of inflation. So this should stimulate more investment in the UAE to take advantage of cost benefits and better infrastructure."
Builder Arabtec climbed 2 percent, recouping most of Wednesday's losses that were sparked by its chief executive being banned from trading on UAE markets for six months.
"The Arabtec news was a dampener in terms of sentiment, but it doesn't affect the company operationally," said Tarik Lotfy, Arqaam Capital Head of MENA equities.
Dubai volumes fell to a 2011 low, while the index was the worst regional performer last year, falling 9.6 percent.
"There isn't much interest from institutions in UAE markets, especially Dubai, because there is still a lot of uncertainty and many unanswered questions," said Samer al-Jaouni, General Manager of Middle East Financial Brokerage Co.
Qatar's National Leasing Co fell 7.4 percent to a four-week low after it reported a 19-percent decline in fourth quarter profit, although the stock remains up 14.2 percent over the past two months. The firm made a net profit of 30.7 million riyals ($8.44 million) in the fourth quarter, down from 37.9 million riyals in the year-earlier period.
It has proposed a dividend of 3 riyals per share, with some investors expecting a bigger a payout, analysts say.
The Dubai index rose 1.2 percent to 1,669 points.
The Abu Dhabi benchmark slipped 0.2 percent 2,752 points.
The Kuwait benchmark fell 0.3 percent to 6,976 points.
The Egypt index slipped 0.1 percent to 7,203 points.
The Qatar measure climbed 0.2 percent to 9,019 points.
The Oman index climbed 0.4 percent to 6,926 points.
The Bahrain measure rose 0.5 percent to 1,430 points.