Property and banking stocks led a broad decline in the Gulf Arab region on Wednesday, with Dubai suffering its biggest daily loss in two weeks, as uncertainty over its debt continued to weigh on investor sentiment.

Dubai's benchmark fell 3.8 per cent to 1,736 points. "Still people are feeling uncertain about real estate in Dubai and everybody is revising the numbers," says Chamel Fahmy, Beltone Financial regional senior sales trader.

"In Dubai, no one can paint a clear picture of where things are heading. Dubai is still trying to figure out what to do," said a Kuwait-based trader, referring to debt concerns.

Traders said no particular catalyst sparked the selloff, although one analyst referred to a newspaper report saying that Deyaar and Union Properties, two Dubai-based property firms, called off merger plans, as the new entity would struggle to secure financing.

After market close, Deyaar issued a statement saying it was not involved in any talks and wanted to explore growth opportunities in the United Arab Emirates and other regions.

"I don't think a merger would improve their financial positions," said Julian Bruce, EFG-Hermes director of institutional sales. "Right now, getting finance for anybody is more difficult after the Dubai debt crisis."

Markets have been coping with fallout from Dubai since late November, when the emirate's flagship conglomerate Dubai World said it would request a standstill on $26 billion in debt linked to property units Nakheel and Limitless World.

Speculation about a possible merger between Deyaar and Union Properties began last year, although both firms denied they were in talks. Deyaar's shares fell 5 per cent while Union Properties declined 4.4 per cent.

"There are still a lot of doubts about Union Properties, its short-term prospects," said Chamel Fahmy, regional senior sales trader at Beltone Financial.

Abu Dhabi's index also posted a decline, falling 1.9 per cent to 2,694 points, with Abu Dhabi Commercial Bank closing 6.1 per cent lower.

In Kuwait, logistics firm Agility extended its losses from the previous days, ending 7.3 per cent lower. The stock has declined nearly 20 per cent since it said on December 21 that US defence contractor DynCorp International had dropped its US unit as a subcontractor in a US Army deal.

"We continue to be nervous on Agility," said a Kuwait-based trader who asked not to be identified.

Qatar's index fell 0.6 per cent, with banks stocks posting some of the biggest declines.Qatar Islamic Bank fell 0.3 per cent, outperforming some of its peers, after Italian insurer Generali said may launch a takaful joint venture.

"Low volumes are expected for the remainder of 2009," said Ray Bencheikh, assistant fund manager at Qatar National Bank.

Saudi stocks edged 0.2 per cent higher to 6,244 points, led by petrochemical stocks, the only Gulf Arab market to post gains amid the regional selloff. The index reached its highest point since December 6.-Reuters