However, they expected the robust oil prices and results of petrochemical and related sectors to remain a key factor that backs regional markets.

“I believe Arab stocks will suffer further as a result of the turmoil in Tunisia and Lebanon which is expected to convince foreign investors to liquidate their holdings and seek investment outlets elsewhere,” Wajdi Makhamreh, CEO of the Amman-based Noor Investments brokerage, told Arab News.

In addition to the geopolitical concerns, Makhamreh also attributed the retreat of Arab equities last week to a profit taking move that was fuelled by reports of poor earnings for certain sectors, including banks, and China’s hiking of interests rates.

“Nevertheless, we think the strong crude prices and the expectedly high prices of petrochemical products will serve as a catalyst for Arab markets, especially in the Gulf region, in the coming weeks,” he said.

Egyptian stocks led the plunge with scared investors resorting to sell-off to avoid losses if the turmoil extends to Egypt, analysts said.

Egypt’s AGX 30 index, measuring the performance of the market’s 30 most active stocks, dived 6.4 percent last week, closing at an 11-week low of 6,698 points.

Saudi stocks also lost ground last week due to profit taking despite the declaration by the market’s leader, the Saudi Arabian Basic Industries Corp. (SABIC), that it had posted an increase in profits of 138 percent in 2010, to $5.76 billion.

The Tadawul All Share Index (TASI) of the Arab world’s largest bourse shed 0.89 percent on weekly basis, closing at 6,657.78 points.

The liquidity for the week came in at SR19.26 billion as compared to SR18.74 billion for the past week.

On a week-to-week basis, the sector activity was mostly negative with 13 out of 15 sectors closing with loses ranging from -0.13 percent by the Retail sector to -3.18 percent by the Media and Publishing sector. On the other hand the gaining sectors for the week were the Industrial Investment with 0.11 percent and the Banks & Financial Services with 0.41 percent, the Financial Transaction House reported in its weekly market commentary.

However, Saudi analyst Mohammad Anqari predicted that SABIC and other petrochemical firms would spur the Saudi stock exchange through higher prices of petrochemical products that would lead to higher earnings later in 2011.

“Stronger world demand for crude and petrochemical products will mean larger profits for SABIC and other petrochemical firms,” Anqari said.

He played down expectations of lower profits for the banking sector due to toxic loans. “The allocations for bad loans will not be the main problem for the banking sector. The main issue for banks lies in their abundant liquidity and if they decide to expand lending,” he said.

Jordanian shares were volatile last week, as investors resorted to profit taking after last week’s gains, Makhamreh said.

The all-share price index of the Amman Stock Exchange lost 0.88 percent on weekly basis, closing at 2,447 points, according to the ASE weekly report.  

Kuwait’s KSE all-share index lost 0.58 percent last week, to close at 6,896 points.

United Arab Emirates shares also lost ground led by the investment and real estate sectors.

The benchmarks of the Dubai and Abu Dhabi stock exchanges shed 0.97 percent and 1.4 percent, closing respectively at 1,609 points and 6,684 points.