Saudi Arabian stocks widened losses on Thursday, having hit an eight-month low in the previous session, while Egypt's blue-chip index rose for a third day after inflation dropped to a multi-year low in August.
The Saudi index closed 0.3% down in its third straight day of losses. Riyad Bank shed 1.8% and the kingdom's largest lender, National Commercial Bank, lost 1.2%.
The market fell as much as 2.5% on Wednesday, wiping out all its gains this year before clawing back some losses to close 0.4% up in the year to date.
With Thursday's losses, the market is now trading only 0.1% higher than the start of the year. It jumped as much as 20% between January and May, led by foreign investors who have been net buyers on the entry of Saudi stocks into the MSCI and FTSE Russell emerging market indexes.
However, some Saudi stocks became overvalued, with the kingdom's slowing economy teetering on the brink of contraction, prompting investors to pull most shares down from lofty valuations.
Riyadh has been encouraging companies to list on the domestic stock market to deepen Saudi Arabia's capital markets as part of reforms aimed at reducing the kingdom's reliance on oil revenue.
The kingdom has experienced a revival in IPOs this year with more are at planning stage, including global oil giant Saudi Aramco IPO, which could generate about $100 billion for Saudi Arabia's state coffers.
Egypt's blue-chip index closed 0.6% up, extending gains for a third day after a fall in consumer price inflation to 7.5% in August, its lowest in years.
Eastern Co rose 4.1%, adding to the previous day's advance after the board proposed an annual dividend of one Egyptian pound per share.
The Dubai index edged up 0.1%, led by gains in financial stocks, with Dubai Islamic Bank adding 0.9%.
In Abu Dhabi, the index was down 0.2% as market heavyweight Abu Dhabi Commercial Bank dropped 2.4%.
Qatar's index also edged lower, slipping 0.1% to brake a four-session winning streak. Lender Masraf Al Rayan was down 1.1%.
SAUDI ARABIA The index was down 0.3% to 7,832 points ABU DHABI The index lost 0.2% to 5,096 points DUBAI The index was up 0.1% to 2,888 points QATAR The index lost 0.1% to 10,462 points EGYPT The index rose 0.6% to 15,110 points BAHRAIN The index was up 0.4% at 1,547 points OMAN The index edged up 0.1% to 4,020 points KUWAIT The index was down 0.2% to 6,251 points
(Reporting by Maqsood Alam in Bengaluru Editing by David Goodman ) ((Maqsood.Alam@thomsonreuters.com;))