UPDATE 1-RESEARCH ALERT-Shuaa downgrades Kuwait's Zain to sell

Aug 13 (Reuters) - Shuaa Capital downgraded Kuwaiti telecom group Zain (ZAIN.KW) to "sell" from "neutral," saying risk-reward profile of the shares were no longer attractive at current levels.

Zain is the most traded stock on the Kuwaiti Stock Exchange, accounting for more than a quarter of all shares changing hands on Kuwait's index .KWSE.

The company's stock has been highly volatile, falling 7.3 percent on Wednesday after climbing 7.8 percent the day before, as speculators play with the stock ahead of an emergency shareholder meeting later this month. Some analysts say the meeting could pave the way for a rival to buy a stake in the telecoms operator.

There is a possibility that a strategic investor or operator could buy a majority stake in Zain by paying a premium to the major shareholders, while minority shareholders are left in the dark, Shuaa said in a note to clients.

The investment bank said if there was a complete takeover of Zain, shares of the company could fetch 1.50 dinars to 1.60 dinars a share.

Shares of Zain closed at 1.32 dinars Thursday in Kuwait. (Reporting by Ramya Dilip in Bangalore; Editing by Aradhana Aravindan)