* Saudi Telecom falls as much as 8.5 pct on regulatory change
* Saudi index at lowest close since March 2011
* Petchems outperform domestically focused stocks
* Dubai's index triggers minor head & shoulders
* Hopes that Egypt's IMF loan to be finalised by mid-month
By Andrew Torchia
DUBAI, Oct 3 (Reuters) - Gulf stock markets were weak on Monday as Saudi Arabia swung widely, hit by plans for reforms to the telecommunications industry, but Egypt rose sharply on hopes that its International Monetary Fund loan would be finalised soon.
The Saudi index fell more than 2 percent at one stage as Saudi Telecom, the country's top operator, tumbled as much as 8.5 percent after the government said it would provide telecommunications firms with "unified licences" allowing them to offer a full range of services.
Analysts said this could mean more competition for Saudi Telecom. The stock closed 4.9 percent lower and the Saudi index finished down 0.6 percent at 5,416 points, its lowest close since March 2011, in active trade.
On Sunday, the index tumbled 3.1 percent on concern over government austerity measures. Last week it reduced allowances for public sector employees and some investors fear further steps - perhaps new fees or taxes on foreign workers.
Austerity worries caused many stocks exposed to domestic demand to underperformed again on Monday. Retail chain Jarir Marketing sank 4.7 percent and Al Rajhi Bank lost 1.5 percent. On Sunday, the central bank told commercial banks to reschedule the consumer loans of customers hit by the public sector pay cuts, which could cost banks money.
Petrochemical shares, dependent on overseas demand, fared relatively well with Saudi Basic Industries up 0.6 percent.
There was massive trade in a rights issue of Takween Advanced Industries - the trading period for the rights ends on Thursday. The rights soared 28.7 percent while the underlying shares gained 1.4 percent to 11.05 riyals.
Elsewhere in the Gulf, where most bourses had been closed on Sunday for Islamic New Year holidays, sentiment was weak partly because of concern about the Saudi market.
Dubai's index fell 1.9 percent to 3,408 points, breaking technical support on the August and September lows of 3,430-3,442 points. That triggered a minor head & shoulders pattern formed by the highs and lows since July and pointing down to around 3,250 points.
Builder Drake & Scull, which has substantial operations in Saudi Arabia, dropped 3.2 percent.
Abu Dhabi lost 1.8 percent as First Gulf Bank slid 2.5 percent, while Qatar fell 0.9 percent as Qatar National bank, the region's largest listed lender, sank 1.9 percent.
In Egypt, the market rose sharply on hopes that an international financing package would be finalised soon after this week's annual meetings of the IMF and World Bank Group.
The Egyptian stock index climbed 3.2 percent in a broad rally, with investment bank EFG Hermes rising 6.5 percent.
Egypt has reached a staff-level agreement for a $12 billion loan programme from the IMF and must secure around $6 billion in bilateral financing to obtain final approval for the programme. It has been in talks with China for $2 billion, while Saudi Arabia and other rich Gulf states may also provide money.
Officials attending the Washington meetings could finalise the bilateral financing, and Arqaam Capital said in a report that the IMF's board might then give final approval to its programme as soon as in the following week.
Arqaam said that at the same time, Egypt might also, at about the same time, take another major step to attract foreign fund inflows and resolve an endemic hard currency shortage with an aggressive devaluation of the Egyptian pound, perhaps to 12 against the U.S. dollar or beyond compared with its current official rate of 8.88.
The central bank could move to a new, hybrid foreign exchange system combining managed and free floats, while hiking interest rates by between 1 and 3 percentage points to ensure market stability, Arqaam said.
* The index slipped 0.6 percent to 5,416 points.
* The index fell 1.9 percent to 3,408 points.
* The index dropped 1.8 percent to 4,396 points.
* The index surged 3.2 percent to 8,133 points.
* The index lost 0.9 percent to 10,310 points.
* The index fell 0.7 percent to 5,359 points.
* The index dropped 0.9 percent to 5,675 points.
* The index lost 0.5 percent to 1,145 points.
Editing by Jon Boyle