MIDEAST STOCKS-Dubai up 1.6 pct on Expo 2020 win but ends well off high
* Dubai index ends back below 3,000 points
* Many funds think market fully valued for now -survey
* But any pull-back unlikely to be sharp
* Petrochemical, retail shares boost Saudi
* Egypt continues downtrend as politics weigh
By Nadia Saleem
DUBAI, Nov 28 (Reuters) - Dubai's share index rose 1.6 percent to close at a five-year on Thursday after the emirate was chosen to host World Expo 2020, but the market closed far off its intra-day high, suggesting many investors feel it is already fully valued for now.
The emirate will be the first Middle Eastern location to host the world's fair, which will trigger billions of dollars of investment in coming years. Real estate and hospitality firms will benefit from Expo-related infrastructure spending in the long term.
There may be immediate gains for economy; investment bank EFG-Hermes raised its 2014 gross domestic product growth forecast for the United Arab Emirates to 5.4 percent from 4.5 percent, citing an Expo-related boost to investor confidence among other factors.
But while Dubai's index rose as high as 3,020 points during the day, climbing above 3,000 points for the first time since November 2008, it gave up most of its gains to finish at 2,946.
"Some investors were expecting more of a move today, but the announcement was not a big surprise for the majority of regional investors," said Sebastien Henin, portfolio manager at The National Investor.
Many funds believe the Expo impact is already largely priced into the stock market which is close to full valuations for now. The latest monthly Reuters survey of Middle East investment firms, published on Thursday, found a third expecting to cut their allocations to UAE stocks in the next three months, while a third expect to raise allocations and the rest to keep current levels.
Fund managers recall that Qatar's stock market rose 16 percent in the four months before it was awarded the right to host the 2022 soccer World Cup at the start of December 2010, and gained as much as 14 percent more in subsequent weeks.
But it then gave up much of those gains and essentially moved sideways for the next two years, as investors realised infrastructure building contracts to prepare for the World Cup would not be awarded immediately, and that the tiny state faced big logistical challenges in staging the event. Qatar's win was more of a surprise than Dubai's.
However, Henin noted: "People have not sold on the news yet, which is a positive indicator." And even if a period of profit-taking starts, it is unlikely to push prices down sharply with many investors believing Dubai's economy and markets are in a long-term upswing.
Shares in Dubai Investment Co, which owns land near the Expo site, rose 3.5 percent and thinly traded Mashreq jumped 8.3 percent. Emaar Properties, a bellwether for the Dubai market, ended flat at 6.30 dirhams, failing to break decisively above this year's peaks of 6.34-6.35 dirhams.
After the recent chasing of small-caps on Expo speculation, bluec hips are expected to outperform the market in coming weeks as investors position for year-end dividends, analysts said.
Abu Dhabi's measure advanced 0.3 percent with small-cap stocks leading gains.
In Saudi Arabia, petrochemical and retail shares helped boost the market, with some analysts expecting the kingdom's bourse to outperform regional markets in the near term.
The main index advanced 0.3 percent to 8,325 points, coming within 1 percent of Nov. 18's five-year closing high of 8,408 points. Shares in Saudi Basic Industries Corp (SABIC) gained 0.7 percent.
"If the same amount of liquidity continues, I would not be surprised to see the index at 8,500 levels before the year-end," said John Sfakianakis, chief investment strategist at Saudi investment firm MASIC.
"Valuations are on the higher side, but we can argue for this. The banking sector could be an opportunity play for 2014 and investors are looking at this and positioning tactically."
He added, "The Saudi market hasn't rallied as much as those in the UAE, so it could continue to rally. Upside for Saudi is much larger than for others in the region."
Elsewhere, Cairo's benchmark index dipped 0.3 percent to its lowest close since Oct. 31. Discontent with the military-led interim government's slow progress in restoring full civilian rule has started to weigh on sentiment, traders say.
* The index rose 1.6 percent to 2,946 points.
* The index gained 0.3 percent to 3,850 points.
* The index climbed 0.3 percent to 8,325 points.
* The index retreated 0.3 percent to 6,184 points.
* The index advanced 0.2 percent to 10,375 points.
* The index slipped 0.4 percent to 6,726 points.
* The index declined 0.7 percent to 7,785 points.
* The index rose 0.9 percent to 1,209 points.
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