AMMAN: Arab stock markets, excluding the Egyptian bourse, plummeted for the second day Tuesday on the fallout from the Dubai World debt default, but analysts dismissed the plunge as “unjustifiable”.

“We believe the collapse cannot be justified on sound financial and economic bases,” Wajdi Makharmeh, chief operating officer at the Amman-based Sanabel International Holding, said.

“Investors across the region came under psychological pressure based on the correlation between regional and global markets and due to the absence of information regarding the extent of the exposure of regional banks to the Dubai world debt,” he said.

The all-share index of the Amman Stock Exchange (ASE) fell 2.24 percent on Tuesday, the first trading day after a five-day holiday marking the Muslim Eid Al-Adha feast.

The decline came despite assurances by Finance Minister Bassem Al-Salem that there would be no impact on the Jordanian banking system from the Dubai World debt crisis.

The Arab Bank, Jordan’s largest banking establishment, supported Al-Salem’s predictions, but it acknowledged that it had contributed $100 million to a syndicated loan to Dubai World which is due to be repaid in 2013.

“The loan remains an operative one under sound banking, credit and accounting criteria, as the firm continues systematic payment of interest,” the Arab Bank said in a statement posted on the ASE website.

Makhamreh attributed the decline of the ASE benchmark on Tuesday to a “sell-off by panicking small investors”.

He predicted that regional stock markets would rebound in the coming couple of days, given the very low prices, when investors realize the real impact of the Dubai debt turmoil.

The Dubai bourse closed 5.6 percent lower, swelling its total drop to 12.5 percent since local markets reopened on Monday, while the index in Abu Dhabi lost another 3.5 percent for an 11.6-percent plunge in 48 hours.

Dubai’s leading real estate sector fell by 9.2 percent on Tuesday, shy of the one-day maximum allowed drop of 10 percent, while the finance and investments sector shed 7.5 percent of its value.

Giant property developer and market leader Emaar sank by 9.9 percent, following the pattern of its Monday movement, and Dubai Islamic bank lost 8.6 percent of its value.

Abu Dhabi’s real estate sector plummeted 9.8 percent, while the banking sector fell 5.6 percent.

However, the intervention by investment funds to make benefit from exceptionally low prices helped to curtail losses at the end of trading sessions, Tamer Najm, director of Investment Funds at Kuwait’s Global Investment House, said.

“Investment funds, including Global’s, entered the market extensively on Monday and today (Tuesday) to seize this opportunity and prop up markets,” Najm told the Dubai-based Arabic version of the CNBC financial television.

“There is no justification at all for any collapses at regional markets, because what happened was the result of erroneous analysis of news,” he said.

The benchmark of Kuwait’s stock exchange, which also started trading on Tuesday after the Eid Al-Adha holiday, shed 2.82 percent.

Doha’s all-share index sank 8.29 per cent on Tuesday, while the bourses of Bahrain and Muscat retreated 0.30 percent and 0.45 percent respectively.

Egypt’s AGX30 index, which measures the performance of the market’s 30 most active stocks, rallied on Tuesday rising 3.38 percent after plummeting 7.02 percent on Monday.

The Saudi stock exchange was closed on Tuesday.

— With input from agencies

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