Shares of Emaar Properties made their sharpest one-day gain in 15 months on Sunday after the largest Arab developer by market value abandoned a deal to buy government land in exchange for stock.

The stock rallied 6.8 percent to its highest close in a month after Emaar said on Saturday it would not go ahead with a deal to give Dubai Holding, owned by the emirate's ruler, about $8 billion worth of stock for land in Dubai.

Uncertainty about the deal, which would have raised the Dubai government's stake in Emaar to 51 percent, drove Emaar shares to a 28-month low last week. The stock is still down almost 10 percent this year.

'The cancellation has removed a lot of the uneasiness that has been weighing on the stock,' said Jalal Faruki, manager of the trading desk at Al Mal Capital in Dubai.

Investors had been concerned their holdings in Emaar would be diluted under the share swap deal and were frustrated that the firm failed to reveal key details about the size, location or value of the land, Faruki said.

'Now Emaar can be valued based just on its business, without this black cloud hanging over it,' Faruki said.

The two companies would work together on property developments in Dubai instead of doing the land-equity swap, they said on Saturday.

Tatweer, one of Dubai Holding's real estate developers, said in May it could double to 200 billion dirhams its investment in a hotel strip on the outskirts of Dubai that it says will include the world's biggest hotel.

Shares of Emaar, which is building the world's tallest skyscraper in Dubai, closed at 11 dirhams ($3), about 80 percent below the 19.70 dirham price target of investment bank EFG-Hermes and more than 70 percent below Deutsche Bank's 19 dirham fair price.

'Liquidity is coming in from both institutional and retail investors in the region,' said Joe Kawkabani, head of asset management at Dubai-based Algebra Capital.

Prior to a 5.64 percent rally in Emaar shares on Thursday, the stock had tumbled 17.4 percent from March 19, when the land swap deal was announced.

It may be more difficult to woo foreign investors that exited the stock since March, and especially since July when global credit market turmoil made them more reluctant to take risk, Kawkabani added.

The company's silence as its stock tumbled has been a disaster for relations with investors.

Emaar and Dubai Holding said on Saturday they determined the land-equity swap deal 'would not be in the best interest of Emaar shareholders.'

'A lot of foreign investors would likely still be sceptical because the company has already scarred them with its handling of the deal,' Kawkabani said. - Reuters