MIDEAST STOCKS-Kuwait resumes rally; Gulf mkts mixed

By Nadia Saleem

DUBAI, May 16 (Reuters) - Kuwait's bourse resumed a rally in heavy trading on Thursday as upbeat expectations of an improving economy outweighed renewed political woes, while other regional markets were mixed.

Kuwait's benchmark .KWSE climbed 1.1 percent, its fifth gain in six sessions. The index, up 33.2 percent year-to-date, has been buoyed by a turnaround in sentiment as a calmer political backdrop lifted sentiment and company earnings improved.

Buyers returned after Wednesday's 0.6 percent decline on the index. Some members of Kuwait's cabinet offered to resign earlier this week but there was little reaction from investors; some are expecting a minor reshuffle of members. ID:nL6N0DW0DJ

The elected parliament has been caught in a long-running power struggle with the appointed government, in which ruling family members hold some top posts. But the political upheaval in the country dissipated in recent months under a parliament considered pro-government because opposition boycott the December elections.

Interest from local and foreign investors has spiked in recent weeks, with May 9's turnover the highest in 44 months at 169 million dinars ($594.3 million). The market traded 89.7 million dinars on Thursday.

"Retail and day trading clients managed to push enough momentum in the market to elevate the price index and daily traded value to levels we have not seen in three years," said Fouad Darwish, head of brokerage at Global Investment House.

Another big boost may come if the government-owned National Portfolio Fund, set up during the 2008 market crash to stabilise prices, begins buying in earnest.

"Many are awaiting the full implementation of the National Portfolio initiative and when it is enacted many of prices we are seeing today will be a discount," Darwish added.

Elsewhere, Dubai's bourse .DFMGI rose 0.4 percent, up for a fourth straight session but trading was choppy amid slight profit-taking. The index is up 41.5 percent year-to-date and the best performing equity market in the Arab region.

Mid-cap stocks dominated trade - a signal the market is at the mercy of retail investors.

"For the last week and half we've seen a lot of interest from retails to put money to work," said Amer Khan, fund manager, Shuaa Asset Management. "Normally this would suggest the rally is stretched but the high volumes mean there is a bit more to come."

He said that bluechip names are likely to see further gains as analysts price in further improvement in the banking and property sector.

Real estate prices have jumped, recovering from a 2008 slump and banks have improved the quality of their loan books.

Abu Dhabi's benchmark .ADI was steady at a 54-month high.

In Qatar, the measure .QSI came under pressure from profit-taking ahead of the weekend and slipped 0.2 percent. It hit a 27-month high on Tuesday as buying momentum from regional investors picked up in recent weeks, attracted by cheaper valuations compared to regional peers.

In Egypt, the benchmark index .EGX30 slipped 0.5 percent, trading in a tight range as investors await catalysts.

Investment firms were the main drag.

THURSDAY'S HIGHLIGHTS

KUWAIT

* The index .KWSE rose 1.1 percent to 7,902 points.

DUBAI

* The index .DFMGI gained 0.4 percent to 2,296 points.

ABU DHABI

* The index .ADI ticked up 0.02 percent to 3,514 points.

OMAN

* The index .MSI advanced 0.4 percent to 6,377 points.

QATAR