DUBAI- Middle Eastern funds will invest in Saudi and Kuwaiti stocks this year but remain cautious about other regional markets and are at their least bullish in a January since 2013, according to a Reuters poll.

Saudi Arabia's impending entry into emerging market indexes should mean a $15 billion inflow of "passive" benchmark-linked funds, which will attract billions more of active funds, regardless of low oil prices or geopolitical tensions.

Kuwait will hear in mid-2019 if MSCI will upgrade it to emerging market status. A positive decision could see its stocks gain immediately although entry wouldn't occur until mid-2020.

One third of fund managers expected to increase their allocations to regional equities over the next three months, while 8 percent expected to reduce them, according to a poll of 12 leading fund managers conducted over the last week.

The poll has been conducted every month since 2013.

Gulf stocks have been hit by poor sentiment. Fourth-quarter results have not been impressive so far - not for banks, petrochemicals, or consumer names, said Akber Khan, senior director of asset management at Al Rayan Investment in Qatar.

Weak oil prices due to concerns about a supply glut have also weighed. Analysts are bearish on oil in 2019, according to a Reuters poll, and forecast an average Brent price of $69.13 this year, more than $5 below analyst projections a month ago. 

Global stocks are also hostage to anxiety over the trade row between United States and China.

Saudi Arabia however, will join FTSE Russell's index in stages between March and December 2019, and join MSCI's index in phases coinciding with reviews in May and August.

Two thirds of the managers polled expect to raise their Saudi equity allocations, and none expected to reduce them.

"Fundamentals take a back seat as active managers race to build positions in anticipation of billions of dollars of passive buying which will commence in around six weeks," said Al Rayan's Khan. Talal Samhouri, head of asset management at Amwal LLC in Qatar, said his firm expected Saudi banks to outperform regional peers.

Analysts have become more optimistic on banks as the kingdom increases government spending to push up growth and due to higher interest rates.

Kuwait is also set to gain in anticipation of a positive decision by MSCI. Some 58 percent of managers expected to raise Kuwait equity allocations, and only 8 percent expected to cut.

"In Kuwait we see fundamental factors (pick up in government investment, consumption spending) nicely aligned with technical factors," such as the potential MSCI decision and ongoing FTSE flows, said Dipanjan Ray, senior manager of research for MENA equities at Emirates NBD Asset Management.

The outlook for other markets is not as positive, however.

Dubai's index plunged 26 percent last year, becoming one of the world's worst-performing bourses, and no recovery is expected as of yet.

One third of managers said they would decrease allocations in the UAE, while one fourth said they would increase then.

"UAE will continue to suffer due to the declining cyclical trend in real estate, and until we see a catalyst, we will remain underweight UAE," said Samhouri.

One third of the managers said they would decrease their allocations in Qatar, while none said they would increase.

Qatar's "valuation looks stretched while technical catalysts seem to have played out already," said Ray.

One quarter of the managers said they would increase their allocations in Egypt as an attractive valuation coupled with an improving economy could help the market perform well this year.

(Editing by Alexandra Hudson) ((Nafisa.Eltahir@thomsonreuters.com;))