Other regional bourses also rose, with the exception of Egypt, whose benchmark dropped after surging to a seven-month high on Thursday.

The Egypt index slipped 0.8 percent to 7,082 points.

In Dubai, construction heavyweight Arabtec added 3.6 percent and Emaar Properties rose 0.9 percent. Both ended 2010 significantly lower after investors dumped real estate stocks over uncertainty about recovery. The Dubai index advanced 2.3 percent to 1,668 points.

"Most of the stocks trading (higher) today are real estate because they got hit during the last period, during the fourth quarter," said Musa Haddad, head trader in National Bank of Abu Dhabi's asset management group.

"These stocks are now pushing the market to the upside."

Air Arabia and logistics services provider Aramex also attracted buying, rising 1.5 percent and 1.4 percent respectively.

"We've seen new cash coming in from the institutional side," said Samer Al-Jaouni, general manager of Middle East Financial Brokerage Co.

"It's the beginning of the year, and global markets closed at a high level on Friday," Al-Jaouni said, adding speculation ahead of full year financials is also a factor.

Dubai's index was the worst regional performer in 2010, slipping 10 percent.

In Abu Dhabi, heavyweight Aldar Properties rose 2.2 percent, lifting the index 0.8 percent. Investors are still waiting for news a government support package to troubled Aldar, after which analysts expect the share price to rise.

"It's worth keeping the big movers in Dubai and Abu Dhabi in your portfolio, we're positive about Abu Dhabi this year," NBAD's Haddad added.

The Abu Dhabi index climbed 0.8 percent 2,741 points.

Qatar's bourse and Oman's index also rose, lifted by banking stocks, but Egypt's benchmark succumbed to profit-booking after four consecutive sessions of gains.

The Qatari index rose 0.7 percent to 8,742 points. The Omani index climbed 0.8 percent to 6,806 points.

"Surprisingly, Egypt opened the year on a negative note," said CIBC Brokerage's Omar Darwish.

"Volumes are still relatively low. Arabs, local individuals, and local institutions are certainly in charge of the weak vibes in an attempt to empty their lucrative gains and start fresh."

Commercial International Bank (CIB), which rose to An all-time high on Thursday, dropped 2.7 percent and Orascom Construction Industries, which was at its highest since October 2008, retreated 1.1 percent.

Petrochemical and related stocks extended Saturday's gains on Saudi Arabia's Tadawul but these were not sufficient to make an impact on the index which ended almost flat at 6,656 points, hovering near eight-month highs. 

The sector activity for the day was mixed with 7 out 15 closing with gains ranging from 0.12 percent by the Transport sector to 1.50 percent by the Multi-Investment sector. On the other hand the losing sectors ranged from 0.01 percent by the Telecommunication & Information Technology sector to 1.15 percent by the Media and Publishing. The overall market breadth for the day was positive with 53 advancers against 60 decliners giving it an AD ratio of 0.88, the Financial Transaction House (FTH) said in its daily market commentary.

The stock market turnover reached SR2.69 billion on Sunday.

Heavyweight Saudi Basic Industries Corp. (SABIC) rose 0.7 percent and Rabigh Refining and Petrochemical Co. climbed 0.9 percent.

Meanwhile, the Saudi Capital Market Authority (CMA) has slapped a SR50,000 fine on major lender Banque Saudi Fransi (BSF) for violating stock market disclosure rules, the watchdog said on Sunday.

BSF was fined SR50,000 for failing to swiftly disclose changes in its board, the CMA said in a statement on the bourse website.

Kuwaiti and Bahraini markets were closed on Sunday.

— With input from agencies