Shares fell across the Gulf Arab region on Tuesday after chemicals maker Saudi Basic Industries Corp (Sabic) made a bigger-than-expected first-quarter loss, raising fears the worst of the downturn has yet to pass.

Shares in Sabic, the Arab world's largest company and a yardstick for the performance of other petrochemical majors, slumped almost 10 per cent after reporting a $259 million loss in the three-month period, triggering broad selling in the Gulf's seven markets.

"Sabic's results and a plunge in oil prices has turned sentiment for the worse," said Sunil Dhall, vice-president at Gulf Baader Capital Markets in Muscat. "The market's rally was technical, with little change in the fundamental outlook."

Saudi Arabia's stock market fell 3.4 per cent, while markets in Oman and Qatar both also fell more than 4 per cent after key executives gave grim earnings outlooks.

Gulf stocks had been gaining for weeks, taking their cue from a global share rally after many hit multi-year lows in February.

"Even though we have turned the corner, it will still be a bumpy ride. People will remain a bit short-sighted," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

"The crisis and major setbacks in profitability have already been priced in. We all know it is going to be bad news, we just need to figure out how bad."

Selling pressure followed a global equity rout on Monday, when crude oil prices -- the main economic driver for the world's biggest oil-exporting region -- fell almost 9 per cent.

Sabic wrote down 1.18 billion riyals ($314.7 million) of goodwill depreciation related to its US unit Innovative Plastics, which it bought from General Electric in 2007. It also said depressed prices had hit its margins.

"There will be a lot of pressure on (Sabic) shares," said Laurent Gally, a chemicals analyst at Dubai-based investment bank Shuaa Capital. "Recovery will be a second-half event. It will have to be gradual."

WORST OVER?

Growth in Gulf economies is slowing after a six-year economic boom came to an end last year as oil prices collapsed and recession gripped the industrialised world.

On Tuesday, Industries Qatar fell after it said net profit in 2009 would likely fall 34.2 per cent on weaker global demand for chemicals and building materials. Qatar is the world's biggest exporter of liquefied natural gas.

In non-Opec oil producer Oman, Bank Muscat shed 6.1 per cent after its chairman said the bank's second-quarter profit would fall as it adopts a cautious approach to new lending and holds back expansion.

Bank Muscat's Sheikh AbdulMalik bin Abdullah Al Khalili said the worst was not yet over for the region's financial sector, where banks have been writing down investments and making provisions for an expected rise in bad debt.

Dubai's index clawed back most of its early losses to close down 0.3 per cent at 1,661 points.

Deyaar was the biggest loser, falling 3 per cent, followed by Aramex and Arabtec Holding, which both dropped 1.8 per cent.

The latter's decline took its losses to 10 per cent since the firm announced a 30 per cent fall in first-quarter profit.

"It's difficult to gauge too much from these summary figures, because they don't tell us anything in terms of the company's cash flow," says Robert McKinnon, Al Mal Capital managing director of equity research.

"Arabtec could keep building projects and billing clients, but we don't know if they're receiving payment."

Abu Dhabi's index fell for a second successive day as banking stocks plunged.

The benchmark dropped 2.2 per cent to 2,567 points. First Gulf Bank, National Bank of Abu Dhabi and Abu Dhabi Commercial Bank all lost more than 5 per cent.

"Bank shares have slumped in global markets and this has spread to the Gulf," says Sunil Dhall, vice-president at Gulf Baader Capital Markets in Muscat.

Real estate also suffered. Aldar Properties fell nearly 5 per cent and Sorouh Real Estate dropped 4 per cent as investors booked profits from huge recent gains. Aldar surged almost 60 per cent this month to Sunday, while Sorouh added around 30 per cent over the same period.