Stocks in Dubai rose the most since October yesterday as shares in the emirate's biggest banks reversed recent losses.
The Dubai Financial Market General Index soared 2 per cent to 1,346.47, led by banks and property companies.
Shares in Mashreq, which have traded on only seven days this year, rose 7.3 per cent to Dh102 each. Emirates NBD's shares rose 3.7 per cent to Dh2.80 following a sharp sell-off on Tuesday. Emaar Properties and Arabtec also made headway.
Meanwhile, the Abu Dhabi Securities Exchange (ADX) General Index gained 0.6 per cent to 2,366.37, led by the biggest gains in Aldar Properties' shares for two months.
The spike came before an announcement from the developer detailing a Dh16.8 billion asset sale to the Abu Dhabi Government.
Aldar's shares rose 3.7 per cent to 84 fils each, snapping a two-day losing streak. The stock was the most traded on the ADX, with 21.3 million shares changing hands.
But without any clear catalysts behind the gains, the rally was most likely speculation that recent losses were overdone, said Fadi Al Said, the head of investments at ING Investment Management.
"The Dubai market had been oversold," he said. "The market was due for a bounce after the disappointment with MSCI."
The index provider declined to upgrade the UAE and Qatar to emerging-market status this month, leading to a sharp sell-off on both markets.
After markets closed, Moody's Investors Service announced it had downgraded Shuaa Capital one notch to "Ba3" and placed it on review for further downgrades.
Elsewhere in the Gulf, markets in Oman and Saudi Arabia rose, with all other bourses closing flat.
UAE markets will be closed on Sunday to mark New Year's Day.
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