MIDEAST STOCKS-Saudi stocks rebound as politics-driven selling eases

By Nadia Saleem

DUBAI, June 17 (Reuters) - Saudi Arabia's benchmark index recovered most of its early-week losses on Monday as investor concerns of a political conflict in Syria spreading wider to the region eased, while all other Arab markets also rose.

The kingdom's benchmark .TASI advanced 1.8 percent, its second consecutive day of gains since Saturday's 4.3 percent plunge.

"The MENA markets are attractive and political tensions have always been there," said Ali Adou, portfolio manager at The National Investor in Dubai. "Despite the risk, the more the market drops, valuations become attractive and more buyers return."

Saturday's panic sell-off on the Saudi bourse - dominated by retail investors - was triggered by political tension in Syria intensifying; King Abdullah cut short a holiday abroad to deal with the issue. ID:nL5N0ER0QM

Egypt severed its democratic ties with Damascus, backing a no-fly zone over the country wrought by civil war.

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Heavyweight firms made a come-back. The petrochemical shares index .TPISI rose 1.6 percent and the banking index .TBFSI climbed 1.9 percent.

Real estate developers dominated trading; Emaar Economic City 4220.SE and Dar Al Arkan 4300.SE climbed 2.6 and 3 percent respectively.

UAE markets also recovered losses from the previous session as selling on political worries proved short-lived and a bullish local economic outlook outshined.

Dubai's index .DFMGI rose 1.6 percent and Abu Dhabi's benchmark .ADI climbed 0.4 percent.

The United Arab Emirates has revived a proposal to merge its two main stock exchanges in a state-backed deal that could boost trade in the local market and attract more foreign investment to the Gulf state, sources familiar with the plan said. ID:nL5N0ET1IX

In Kuwait, the index .KWSE gained 1.6 percent after a court ruling dissolved the parliament and called for fresh elections. ID:nL5N0ES095

Analysts said investors reacted positively to the dissolution of the parliament elected in December. Opposition boycott these polls in protest to a new voting system decreed by the emir. The court upheld the voting rules.

Traders said there was a widespread belief that state funds would intervene if needed to support the market during political uncertainty.

The market is still up 36.2 percent year-to-date, in a rally driven mainly by retail investors, who have been encouraged by a government push on economic development and expected improvement in corporate earnings.

Elsewhere, Egypt's bourse .EGX30 mirrored the regional trend and rose 1.2 percent, cutting 2013 losses to 14.7 percent.

Telecom stocks rallied with Orascom Telecom ORTE.CA and Telecom Egypt ETEL.CA up 6.1 and 6.7 percent respectively.

"Investors want to buy Egypt in this shaky time and something that's less risky - telecoms are defensive stocks that were hit badly so the rebound is as strong," said Mohamed Radwan, director of international sales at Pharos Securities.

Low trading value is indicative of risk-averse attitude ahead of June 30 - President Mohamed Mursi's one-year anniversary in office. Opposition parties have called for mass protests against the Islamist leader.

MONDAY'S HIGHLIGHTS

SAUDI ARABIA

* The index .TASI climbed 1.8 percent to 7,463 points.

DUBAI

* The index .DFMGI rose 1.6 percent to 2,383 points.

ABU DHABI

* The index .ADI gained 0.4 percent to 3,643 points.

QATAR

* The index .QSI ticked up 0.06 percent to 9,430 points.

EGYPT

* The index .EGX30 climbed 1.2 percent to 4,659 points.

KUWAIT