Saudi Arabian stocks fell on Tuesday as banking shares weakened, while builder Arabtec Holding posted its sharpest single-day rise in more than two years after announcing a potential merger, helping to lift the Dubai index.

Saudi's index was down 0.6%. Al Rajhi Bank and the kingdom's largest lender National Commercial Bank both dropped 1.1%.

Real estate firm Arriyadh Development and gym network operator Leejam Sports shed 3.5% and 0.8% respectively as the stocks traded ex-dividend.

Tuesday's fall leaves the index's year-to-date gains at 2.2%, after it jumped as much as 20% in May ahead of the inclusion of Saudi stocks in the MSCI emerging markets index, which attracted billions of dollars from foreign investors. They have been net buyers every month this year.

The market remains under pressure with Middle East funds planning to reduce investment in Saudi Arabia, a Reuters poll showed late last month. 

In Dubai, the index was up 0.2%, with its largest listed developer Emaar Properties gaining 0.4%.

Arabtec Holding soared 8.8%, its biggest single-day gain since July 2017. The firm said on Tuesday it had begun a review to explore the possibility of merging its construction business with Abu Dhabi's private rival Trojan Holding.

The builder's shares traded at 1.73 dirhams, down from 28.73 dirhams at their mid-2014 peak when property prices began to head downwards.

Dubai property prices have tumbled 25-35% since mid-2014, and are expected to decline further this year and next as a slowdown in the economy and an oversupply of housing units pose big downside risks to an already weak outlook. 

The Abu Dhabi index edged up 0.1%, with Al Dar properties adding 1.4%. The firm earlier this week said it was launching a residential project on Saadiyat island that would be open to all nationalities.

This is the first development on Saadiyat island since April, when Abu Dhabi amended its real estate law allowing all foreigners to own land and property in investment areas on a freehold basis.

Qatar's index traded flat with its blue-chip petrochemical maker Industries Qatar shedding 1.4%.


(Reporting by Shakeel Ahmad in Bengaluru; Editing by Kim Coghill) ((