MIDEAST STOCKS-Egypt at 6-mth high on political hopes; most Gulf lower

CAIRO/DUBAI Feb 12 (Reuters) - Optimism about political stability helped lift Egypt's bourse to a six-month high on Sunday despite a currency downgrade, and Kuwait's index rose on hopes of strong dividends, while most other Gulf markets slipped.

Egypt's main index jumped 2.9 percent to its highest close since Aug. 4, brushing off a Standard & Poor's currency downgrade, on hopes that political stability may be returning to the country after a year of turmoil.

Traders said many investors were relieved that a countrywide strike called by activists for Saturday passed off with few disruptions, and that Egypt's talks with the International Monetary Fund seem to be going ahead with few glitches.

"News the strike was not successful overshadowed Standard & Poor's," said Osama Mourad of Arab Finance Brokerage."

S&P on Friday cut Egypt's long-term foreign currency rating to B from B+, five notches into junk territory, and kept the outlook at negative, citing a sharp decline in Egypt's foreign exchange reserves and political uncertainty.

Despite the index's rise, traders said some investors feel economic bumps lie ahead.

"No one can deny that the market is cheaply priced, but there is heavy buying that does not fit in with the economic situation of the country," said Walaa Hazem of HC Securities.

Blue-chips led, with Orascom Telecom advancing 10 percent and Orascom Construction gaining 6 percent.

Top investment bank EFG-Hermes and property firm Talaat Moustafa at least 9.6 percent each.

Kuwait's index rose 0.7 percent to its highest close since Nov. 3, with Gulf Finance House up 7.5 percent.

"There's a rumour that full-year corporate action is going to be better than expected," said a Kuwait-based trader who asked not to be identified. "What that means, no one knows, are they in the position to give dividends or not."

In Saudi Arabia, Etihad Etisalat (Mobily) gained 2.1 percent after the telecom firm signed a $2.7 billion loan refinancing.

The index eased 0.02 percent from Saturday's 21-month high, with Saudi Basic Industries Corp (SABIC) slipping 0.8 percent, Al Rajhi Bank down 0.3 percent and Samba Financial Group falling 0.8 percent.

Dubai's index gained 0.1 percent to its highest close since Aug. 29, with Shuaa Capital jumping 14.9 ahead of expected earnings.

"The company is working on restructuring and discussion provisions for previously active units," said Samer al-Jaouni from Middle East Financial Brokerage Co. "These discussions are internal and the market is still not clear about them."

The struggling financial firm has yet to announce fourth-quarter results. An analyst at HSBC expects it to post a net loss of $22.9 million for the period. [IS:nLDE80503G]

In Abu Dhabi, the index dipped 0.4 percent after heavyweight Etisalat lost 2.1 percent following the telecom firm's $827 million write-off over of its India operations.

"At these levels, investors are cautious and might not take action until further results," Jaouni said.

SUNDAY'S HIGHLIGHTS

EGYPT

* The measure jumped 2.9 percent to 4,893 points.

KUWAIT

* The measure gained 0.7 percent to 5,904 points.

SAUDI ARABIA

* The index eased 0.02 percent to 6,803 points.

DUBAI

* The index gained 0.1 percent to 1,489 points.

ABU DHABI

* The index declined 0.4 percent to 2,456 points.

QATAR

* The benchmark eased 0.04 percent to 8,687 points.

OMAN

* The index slipped 0.4 percent to 5,601 points.

BAHRAIN

* The measure climbed 0.2 percent to 1,139 points. (Editing by Firouz Sedarat)