* Saudi Arabia, Egypt pull back from six-year highs
* Saudi banks have overshot price targets
* Egyptian investors book profits in property, telecoms
* Qatar hits new record ahead of foreign fund inflows
* UAE bourses lack catalysts
By Olzhas Auyezov
DUBAI, Aug 25 (Reuters) - Stock markets in Saudi Arabia and Egypt edged down on Monday as investors booked profits after strong gains, while Qatar's bourse rose on expectations for fund inflows when a few local stocks get higher weightings in MSCI's emerging market index.
Saudi Arabia's main stock index ended a six-day upswing, closing down 0.6 percent after earlier in the day rising above the psychologically important level of 11,000 points for the first time since January 2008.
Trading volume soared when the index began falling and shrank when stocks came off their lows, while 14-day momentum formed a negative divergence - all bearish short-term technical signals that suggested the market might be peaking.
The index had jumped over 13 percent since the stock market regulator said on July 22 that it would allow direct investment by foreigners in the first half of next year. It published draft regulations for the reform last Thursday.
Another factor behind the uptrend was expectations that Saudi banks, which are to a considerable extent financed by Islamic deposits bearing no interest, will benefit from the expected rise in U.S. interest rates. The Saudi riyal is pegged to the U.S. dollar, meaning Saudi rate policy follows U.S. policy.
But some banking stocks have now overshot even the most optimistic price targets. Alinma Bank, which slid 2.4 percent to 24.80 riyals and was the main drag on the index on Monday, had surged 34 percent since the July 22 announcement.
The median target price for the stock, based on estimates from five analysts surveyed by Reuters, is 19.90 riyals and the highest estimate is 23.30 riyals.
"We saw a strong move today in (Saudi) banks but the volatility was high," said Ali Adou, portfolio manager at The National Investor in Abu Dhabi. "I think the rises in the last couple days were speculative."
Some Saudi small-cap firms continued to attract interest on Monday; builder Abdullah Abdul Mohsin Al Khodari Sons Co rose 5.0 percent after saying it had won three contracts from the Ministry of Higher Education worth a total 689 million riyals ($184 million).
Egypt's bourse also retreated from a six-year high and fell 1.0 percent. Among the main drags were stocks that had posted big gains in the last few days, such as property developer Talaat Moustafa and Global Telecom , which fell 1.7 and 2.8 percent respectively.
"I think it's just profit-taking as the (second-quarter) results season is over and the market is just taking a breather," said Harshjit Oza, assistant director of research at Naeem Brokerage.
Shares in real estate firm Amer Group fell 3.8 percent after it said its partner in a hotel project in Syria had filed an arbitration lawsuit against Amer, seeking the termination of the contract and compensation of $176 million. Amer said it rejected claims made in the lawsuit.
Qatar's bourse rose 0.8 percent to a new all-time closing high of 13,866 points. Shares in Industries Qatar rose 1.1 percent and Qatar National Bank was up 0.3 percent.
Analysts expect passive foreign funds to invest about $100 million of additional funds in the local market - mostly into those two stocks - when index compiler MSCI increases their weightings in its emerging market benchmark at the end of this month.
Stock markets in the United Arab Emirates moved little in the absence of fresh catalysts. Dubai's bourse added 0.1 percent and Abu Dhabi slipped 0.1 percent as trading volumes on both bourses edged down.
* The index fell 0.6 percent to 10,843 points.
* The index slid 1.0 percent to 9,403 points.
* The index climbed 0.1 percent to 4,970 points.
* The index slipped 0.05 percent to 5,079 points.
* The index edged down 0.04 percent to 7,389 points.
* The index fell 0.2 percent to 7,342 points.
* The index rose 0.8 percent to 13,866 points.
* The index fell 0.8 percent to 1,474 points. (Editing by Andrew Torchia)