* Foreigners account for 70 pct of demand for share sale
* Asiacell to start trading on Baghdad bourse on Monday
* Share sale is Iraq's largest, 2 other telcos must follow (Recasts, adds foreigner dominate buy orders, investor quotes)
By Aseel Kami
BAGHDAD, Feb 3 Foreign investors bought more than two-thirds of Iraqi mobile operator Asiacell's $1.35 billion share sale, with parent Qatar Telecom expected to have increased its stake.
The share offer was one of the Middle East's biggest in the last few years, and was seen as a test of investor confidence for future deals as Iraq recovers from years of war, political instability and financial sanctions.
Domestic rivals Zain Iraq, a subsidiary of Kuwait's Zain , and France Telecom affiliate Korek are also required to sell shares under the terms of their licences, having missed an August 2011 deadline, along with Asiacell.
Taha Abdulsalam, chief executive of the Iraq Stock Exchange (ISX), told Reuters on Sunday it had received orders for all 67.5 billion Asiacell shares on sale, comprising 25 percent of the company's share capital.
Qatar Telecom (Qtel), which owned 53.9 percent of Asiacell before the sale, was expected to increase its holding, Layth Sulaiman, head of the exchange's board of governors, said last week.
Ali al-Mukhtar, a local broker, on Sunday said most buyers were foreigners, with Qtel the main acquirer. Qtel was not immediately available to comment.
Qtel in June agreed to pay $1.5 billion to raise its stake in Asiacell to 60 percent from 30 percent, with the remaining 6.1 percent pending regulatory approval.
Firas Mechael, a member of the ISX board of governors, said foreign investors placed orders for more than 47 billion shares, with Iraqis accounting for the rest. In total, there were 2,900 separate orders. The shares were sold at 22 Iraqi dinars ($0.02) each.
A breakdown of purchases by foreign investors was not available.
The share sale is technically not an initial public offering (IPO), with Asiacell having earlier completed a nominal IPO so that it could convert to a joint stock company as required under Iraqi law to be able to list on the local bourse.
As a secondary offering, some shareholders offloaded their shares - Faruk Group Holding, owner of an estimated 40 percent, stake was thought to be a main seller - and they will receive the proceeds, rather than Asiacell.
Trading had been expected to start on the exchange on Sunday, but it will now begin on Monday, ISX officials said.
Investors on the trading floor of the Baghdad bourse, which has a daily turnover of about $4.9 million, gave a mixed reaction.
Some cheered and congratulated each other. Yaseen al-Dulaimi, a local investor who had bought 10 million shares, said he expects the share price to rise when trading starts on Monday, but Ammar Jassim, 32, was more wary.
"I feel afraid to buy, its price is too high - it could go down in tomorrow's session," said Jassim. "Even my colleagues in the market did not buy."
Banking and financial companies make up most of the 85 stocks quoted on the ISX. Asiacell's listing values the telecom operator at $5.4 billion and will more than double the bourse's market capitalisation when it starts trading. (Reporting by Aseel Kami in Baghdad, Writing and additional reporting by Matt Smith in Dubai, Editing by Andrew Torchia and Erica Billingham)