Dubai: Gulf stocks declined for the second straight day this week on investor concern about the tumbling markets worldwide and fears about a slowdown in the economy because of the liquidity squeeze despite central banks and governments support.

The UAE Central Bank Governor's statements early in the day on Monday that the situation is stabilising and the banks are safe could not save the UAE markets from plunging. However, Sultan Bin Nasser Al Suwaidi said that the real estate market could see a correction, but the banks are going to weather its impact.

The US presidential elections are also playing in the minds of the nervous investors, globally and locally, says one local trader. "Investors are worried about the elections considering that the outcome of the election would have a far-reaching impact on global policies," said Vyas Jayabhanu, head of Al Dhafra Financial Brokerage.

"The result is no amount of good news - better results from certain companies and certain buy back announcements - seems to be working currently," he added.

The UAE stock markets witnessed selling pressures including bellwether Emaar Properties, which has started to buy back shares. Shuaa Capital also announced to buy back shares, but that didn't cheer up the investors. The Dubai Financial Market (DFM) slumped to its lowest close since March 2005, shedding 5.80 per cent to close at 2,922.66, while the Abu Dhabi Securities Exchange (ADX) was down 2.01 per cent to 3,321.52.

Real estate, construction and financial stocks continued to be the worst-hit. Arabtec, the largest UAE construction company by market value, was the biggest loser on DFM. It sank 9.97 per cent to close at Dh5.96. Emaar tumbled 9.25 per cent to end at Dh5.10. Aldar properties in Abu Dhabi shed 5.58 per cent to Dh4.91. Emirates NBD plunged to its lowest in a year to end 3.28 per cent down to Dh6.19. On ADX, First Gulf Bank and Commercial Bank International lost 9.26 per cent and 9.81 per cent respectively.

Elsewhere in the region, Kuwait's index closed 2.22 per cent lower at 9889 after Sunday's move of the government to come to the rescue of the Gulf Bank after its clients defaulted on currency contracts and is expected to face massive losses. Saudi Arabia's Tadawul, down 50 per cent this year, ended 4.17 per cent in the red at 5301, its lowest level since January 2007. Oman's main index crashed 7.45 per cent to 6021, its lowest close since June 2007.

- With additional inputs from Reuters