However, several fund managers said their positive long-term outlook for Egypt had not changed. MENA Capital called the market's drop a "passing phase".
"While the market could continue to trade sideways in the short term, we cannot justify a change in our view on Egyptian equities given current valuations, earnings per share growth, and the medium-term outlook for local interest rates," said Mohamad Al Hajj, head of regional strategy at EFG Hermes.
In a sign that underlying appetite for Egyptian equity remains solid, a private offer of shares in Egypt's Sarwa Capital was 10.83 times oversubscribed, said Beltone Financial, which is managing the sale of around 295 million shares in a private and public offer.
Meanwhile, the Saudi Arabian stock index edged down 0.1 percent as most banks were sluggish, but Alawwal rose nearly 3 percent to 14.62 riyals. SABB reversed early gains to close 1.1 percent lower at 31.90 riyals.
Under their binding deal, reached after the banks revealed merger talks earlier this year, SABB will pay for the merger by issuing new shares and the deal values each Alawwal share at 16.26 riyals, the banks said.
Although the agreement values Alawwal above market, SABB could benefit from increased size; the merger would create Saudi Arabia's third-biggest lender with market capitalisation above $17 billion, the statement said.
Alujain Corp continued to fall, dropping 2.8 percent after it said earlier this week that a fire broke out at its affiliate National Petrochemical Industrial's plant, halting production.
Dubai's real estate stocks continued to drag down its index, which closed 0.8 percent lower in its third straight session of losses. Emaar Properties sank nearly 3 percent.
Loss-making construction firm Drake & Scull , which had been rebounding recently, fell back 1.4 percent on the day of its shareholder meeting, which is expected to discuss ways to strengthen the company.
DAMAC Properties rebounded 1.5 percent; it slid on Wednesday after saying it expects Dubai's real estate market to face another few quarters of softness before starting to rebound from late 2019.
Oman's index was up 0.2 percent, helped by a memorandum of understanding between Al Izz Islamic Bank and Oman Arab Bank for a potential merger. Al Izz Islamic jumped 5.9 percent in heavy trade to its highest level since mid-2017.
SAUDI ARABIA * The index fell 0.1 percent to 7,998 points.
DUBAI * The index slid 0.8 percent to 2,792 points.
ABU DHABI * The index inched up 0.1 percent to 5,007 points.
QATAR * The index was up 0.1 percent to 9,903 points.
KUWAIT * The index fell 0.3 percent to 5,315 points.
BAHRAINs * The index dipped 0.4 percent to 1,325 points.
OMAN * The index rose 0.2 percent to 4,526 points.
EGYPT * The index sank 1.5 percent to 14,105 points.
(Editing by Andrew Torchia, Larry King) ((email@example.com; within U.S.+1 646 223 8780; outside U.S. +91 80 6749 2733; Reuters Messaging: firstname.lastname@example.org))