UPDATE 4-Suzuki gains on tie-up reports, VW focus on Qatar

* Investors cheer possible cooperation of Suzuki, Volkswagen

* Small-car tie-up would be 2nd attempt between VW, Suzuki

* Suzuki shares rise as much as 7.7 pct, VW up 3.7 pct

* Investors focus at VW still firmly on possible Qatar deal

(Recasts lead, adds trader comments)

By Chang-Ran Kim and Maria Sheahan

TOKYO/FRANKFURT, June 26 (Reuters) - Possible plans by Volkswagen (VOWG.DE) to cooperate with Suzuki Motor (7269.T) raised an enthusiastic response among investors on Friday, but traders said the main focus at VW remained firmly on Qatar.

A source familiar with the matter had told Reuters on Thursday that Volkswagen (VOWG.DE) is exploring a deal to cooperate with the Japanese automaker to boost its presence in ultra-small cars. [ID:nLP51283]

Investors cheered the prospect of ties between the two automakers, which have weathered the slump better than many rivals on their emerging markets presence, as a proactive move to fill an expected demand for smaller cars in coming years.

"The ultra-small car segment is expected to grow substantially through high demand in emerging markets such as India and potential demand in mega cities," said MM Warburg analyst Marc-Rene Tonn.

Auto demand in developed markets such as North America, Japan and Europe has yet to recover from a global recession which prompted customers to tighten their purse strings.

German publication manager magazin said Volkswagen could secure a cooperation deal by taking a 10 percent stake in Suzuki. A spokesman for Suzuki said he had not heard anything about a potential tie-up, while Volkswagen declined to comment.

VW shares rose 3.7 percent at 251 euros by 1258 GMT, making them the biggest gainer on Germany's blue-chip index .GDAXI, making.

Traders said VW shares, which ended 3.7 percent lower on Thursday after news of the Suzuki tie-up, had regained Wednesday's momentum when they jumped 11 percent after sources said sportscar maker Porsche (PSHG_p.DE) was advancing towards a deal with Qatar to give the Gulf state a shareholding in Volkswagen. [ID:nLO308520]

"It is much more the possible interest from Qatar (that is driving interest in VW). That's really the story of the day for VW," a Frankfurt-based trader said.

Shares of Suzuki, meanwhile, had ended up 5.5 percent at 2,195 yen after rising as much as 7.7 percent to a 10-month high. Tokyo's auto index .ITEQP.T gained 0.3 percent.