KFH rose 1.6 percent to its highest close since Dec. 24, 2008.

“Many people expect KFH to make a capital increase and that this will be cheap,” said Essa Al-Hassawi, assistant manager at Zumorroda Investment Co. in Kuwait.

He said market talk was for a KFH capital increase to be priced at 0.4 to 0.5 dinars per share.

In February, KFH said it was not considering a capital increase “for the time being,” while in October, rival National Bank of Kuwait completed a 10 percent rights issue that was priced at 0.500 dinar per share.

At the time, NBK stock was trading around 1.500 dinar, so local banks have a precedent for steep discounts on rights issues, even allowing for subsequent dilution.

Other banks also prospered. NBK climbed 1.4 percent and Gulf Bank added 1.8 percent. Kuwait’s The index climbed 0.3 percent to 6,960 points.

In Doha, Commercial Bank of Qatar rose 1.7 percent, despite reporting below-forecast fourth-quarter earnings, with the stock seen as cheap compared to market leader Qatar National Bank.

Qatar’s stocks rose 0.8 percent to 8,984 points.

The Tadawul All-Share Index (TASI) ended at 6,722.79 points after gaining 0.46 percent. The sector activity for the day was all positive except 1 losing sectors. The gaining sectors ranged from 0.07 percent by the building and construction sector to 0.72 percent by the media and publishing sector. On the other hand the losing sector for the day was the agriculture and food industries sector with -0.19 percent. The overall market breadth for the day was positive with 74 advancers against 49 decliners giving it an AD ratio of 1.51, the Financial Transaction House, licensed by the Capital Market Authority (CMA), said in its daily market commentary. The stock market reached SR2.98 billion.

Abu Dhabi’s Aldar Properties fell 3.5 percent, equaling Sunday’s five-year low and further declines are forecast to reflect the company’s restructuring plan, which is seen as detrimental to equity holders.

“I don’t foresee a turnaround in UAE property prices in 2011 - more supply, absence of encouraging mortgages and the shortcomings of the existing visa law mean higher vacancy rates and further declines in asset values,” said Roy Cherry, SHUAA Capital senior vice-president for research.

He said Aldar remained expensive compared to Dubai rival Emaar Properties, despite its shares dropping 15 percent unveiling its restructuring plan on Jan. 13.

Abu Dhabi’s index fell 0.3 percent to a 16-week low.

In Dubai, contractor Drake & Scull climbed 4.6 percent after it won a $126.6 million contract in Egypt. Nomura upgraded Drake to “buy” from “neutral.”

Emaar rose 2.1 percent and builder Arabtec added 2.8 percent.

Dubai’s index rose 1.6 percent to a two-week high.

Meanwhile, Oman’s index dropped 0.6 percent to 6,965 points while Bahrain’s measure edged up 0.1 percent to 1,436 points.

— With input from agencies