MIDEAST STOCKS-Saudi drops to 3-wk low; Emaar lifts Dubai

By Nadia Saleem

DUBAI, July 16 (Reuters) - Shares in Zain Saudi 7030.SE slumped to a record low on Monday amid a slow initial take-up of its rights issue, while Saudi Arabia's index fell to a near three-week low. But Emaar Properties EMAR.DU lifted Dubai's bourse.

Shares in Zain Saudi sank 4.4 percent to 11.90 riyals. The telecom operator's $1.6 billion rights issue, which closes on Tuesday, has sold only 54 percent of shares available, lead underwriter Banque Saudi Fransi (BSF) 1050.SE said. Parent firm Zain ZAIN.KW and underwriting banks are set to meet any shortfall.

"People are playing it as an arbitrage opportunity, selling it at the current price and buying it at 10 riyals (the rights issue price)," said Ahmed Raza Khan, head of research for asset management at Riyadh-based MEFIC Capital.

"Anyone not afraid to lose the percentage holding in their portfolio wouldn't mind selling the stock and subscribing to the rights. After the rights issue closes, there might be some selling pressure again."

Zain Saudi's rights issue is being used largely to ease some of its debts. ID:nL6E8I723U

Saudi banks were lower with Alinma Bank 1150.SE down 2.6 percent and Bank Aljazira 1020.SE falling 2.7 percent.

The kingdom's main index .TASI slipped 0.3 percent in thin trade to 6,641 points, its lowest close since June 27.

DUBAI

Elsewhere, Dubai bellwether Emaar Properties EMAR.DU hit an 11-week high ahead of the developer's quarterly earnings, expected in coming weeks. This lifted the emirate's bourse to its highest close since May 9.

Three analysts polled by Reuters expect the developer to post an average profit of 516.3 million dirhams ($141 million), which would be a 106 percent increase on a year earlier.

"People are expecting better results this quarter than usual," said Mostafa Yousry, Cairo-based equity trader at EFG-Hermes. "Hotels have been doing pretty well in 2012 so far. So a nice piece of revenue should be rolling in from that as well."

Shares in Emaar rose 2.5 percent to 3.23 dirhams, their highest close since May 1.

"Emaar is heading to 3.35, its next resistance level, while support will come in at 3.00," said Mohabeldeen Agena, head of technical analysis at Cairo's Beltone Financial. "The rally is backed by strong volumes." The stock peaked around 3.35 dirhams in April 2011 and again in April 2012.

Contractor Arabtec ARTC.DU added 2.8 percent and budget carrier Air Arabia AIRA.DU rose 1.7 percent, outperforming the benchmark .DFMGI , which climbed 0.9 percent.

Elsewhere, shares in Bank Muscat BMAO.OM rose 2.9 percent, up for a third session since last Wednesday's two-year low, after the lender reported higher-than-expected earnings. It made a second-quarter profit of 35 million rials ($91 million), according to Reuters calculations. ID:nLDE86200N

In Egypt, the main index .EGX30 gained 0.5 percent, as bargain hunters stepped in after recent declines spurred by the failure of the new president to appoint a government more than three weeks since his election win.

Traders say the market is focused on the need for a cabinet that can tackle the country's urgent economic problems and that shares will likely rally in relief once President Mohamed Mursi announces a new prime minister.

MONDAY'S HIGHLIGHTS

SAUDI ARABIA

* The benchmark .TASI slipped 0.3 percent to 6,641 points.

DUBAI

* The measure .DFMGI rose 0.9 percent to 1,517 points.

OMAN

* The index .MSI rose 0.6 percent to 5,499 points.

EGYPT

* The benchmark .EGX30 gained 0.5 percent to 4,741 points.

QATAR

* The index .QSI gained 0.1 percent to 8,295 points.

KUWAIT