Developer Palm Hills fell 8.5 percent, dragging Egypt's main index after EFG-Hermes cuts its fair value estimate due to asset write-offs and growing risk premiums across its projects.

"Although the stock has lost around 70 percent of its value in the year to date, we believe that further downside potential remains," EFG said in a note, rating Palm Hills "neutral".

Palm Hills' real estate peers SODIC and Egyptian Resorts fell 4.2 percent and 7.7 percent. The index closed 1.1 percent lower at 4,982 points.

"There's a lack of news, so there is no motivation to continue what market speculators started in the past few days," said Cairo-based Nader Khedr, an investment and capital market analyst.

Saudi Arabia's index extended decline as banks and petrochemical stocks, the two largest sectors in the Kingdom, weighed. The Tadawul All-Share Index (TASI) closed 0.17 percent down at 6,682.61 points on Wednesday.

Heavyweights Saudi Basic Industries Corp. (SABIC) and Al-Rajhi Bank slipped 0.2 and 1 percent respectively.

The Saudi stock market turnover reached SR4.76 billion on Wednesday.

Dubai's index fell for a seventh session in nine, slipping 0.7 percent to a three-week low. Volumes slumped to a 15-week low.

Lender Emirates NBD and Dubai Financial Market each dropped 1.5 percent, while courier Aramex lost 2.7 percent.

The MSCI decision will set the market direction in the medium term, said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.

Abu Dhabi's index rose 0.4 percent to 2,700 points with Aldar Properties gaining ahead of its first-quarter earnings. In heavy trade, the developer climbed 0.6 percent.

Late selling condemned Qatar's index to its fourth straight decline, but traders continued to speculate over the prospects of the country being upgraded to emerging market status by index compiler MSCI.

"You will have a solid flow of cash on speculation of the MSCI emerging market story," said Ahmed Mohamed Shehada, head of trading at Qatar National Bank Financial Services.

Bank Muscat pulled Oman's index lower, slipping after Standard and Poor's downgraded its Bahrain affiliate Bank Muscat International on Tuesday, citing its weak operating performance.

Bank Muscat fell 1.2 percent in heavy trading and the index lost 0.3 percent as other large-cap stocks also faced selling pressure.

"The market is seeing strong pressure because of lack of volumes," said Adel Nasr, United Securities brokerage manager. "When you see volumes falling, traders will definitely be on the sell side."