Abu Dhabi's index made its largest gain for more than eight months on Sunday and most other Gulf Arab markets also advanced as speculators bet Dubai's immediate debt problems would be resolved.

Telecoms stocks helped Egypt surge 6.6 per ent - its biggest rise for 14 months - after the country's regulator approved France Telecom's offer for Mobinil.

Abu Dhabi's benchmark surged 4.5 per cent, Dubai climbed 3.3 per cent and Oman's 2.6 per cent gain was its largest for seven months.

'Cautious investors are shying away, while day traders and speculators dominate, so it's very difficult to say what will happen - we can't go on technical analysis, contrary to what some people say,' said Ayman el-Saheb, Darahem Financial Brokerage director of operations.

On Monday, Dubai World Unit Nakheel's $3.5 billion sukuk will mature and investors, both local and international, appear increasingly confident the beleaguered property developer will not default.

'There are rumours that we will have some good news coming out of Abu Dhabi about Dubai's debt and that prompted the buying which started on Thursday,' said Darahem's Saheb. 'But it's a purely speculative move and trading is extremely volatile.'

The sukuk traded at 52 cents to the dollar on Friday after dropping as low as 40 last week, while the cost of insuring the emirate's debt eased, according to Reuters data.

In late November, Dubai World stunned global markets by asking for a standstill on $26 billion of debts. This spurred panic selling on UAE bourses, with the Dubai index falling 27 per cent in six trading days.

It has gained 11 per cent in the two sessions since Emaar Properties called off a merger with three Dubai Holding units late Wednesday.

Emaar rose 6.8 per cent and nine Dubai other stocks gained 5 per cent or more, but there was strong selling pressure towards the session-end.

'Prices are so distorted right now; we are in a technical rebound,' said Haissam Arabi chief executive at Gulfmena Alternative Investments.

'Tomorrow is a big day, until we get some clarity (about Dubai's debt) there will be no real trend. The main catalyst we are waiting for is Nakheel news,' he remarked.

Many analysts remain downbeat, despite Sunday's regional surge, with notes from NBK Capital and Shuaa Capital among those advising investors to sell into strength.

'Nothing has changed as more selling remains visible,' Shuaa's note added in relation to the Saudi bourse.

Egypt's Mobinil jumped 16 percent after the regulator approved an offer from a unit of France Telecom to buy all of Mobinil's shares at 245 pounds each.

Orascom Telecom, which owns about 35 per cent of Mobinil, rose by the same margin. Orascom also announced plans for a rights issue to raise $800 million.

Kuwait's index claimed its largest gain for 18 weeks as Global Investment House surged 5.3 per cent after agreeing a $1.7 billion debt restructuring plan.

Saudi Arabia's index ended almost unchanged, with investors little moved by the regional rally. 'Volumes remain subdued in Saudi right now,' said Fouad Dajani vice president at Credit Suisse Saudi Arabia.

'There isn't much appetite to allocate substantial capital. Local investors here do not want to be caught out again if anything negative were to transpire out of Dubai.'-Reuters