* Cairo market opens up, then falls
* Constitution approval mostly seen as positive for stocks
* But profit-taking, concern over c.bank governor weigh
* Some fear a c.bank change could signal weaker pound
* Foreign investors remain net buyers of stocks
By Nadia Saleem and Tamim Elyan
DUBAI/CAIRO, Dec 23 Egypt's bourse dropped in volatile trade on Sunday, pulled down by profit-taking and concern that the central bank governor might resign, after stocks rose early on in response to voters' approval of a new constitution for the country.
Supporters and opponents of President Mohamed Mursi said their unofficial counts showed the constitution had been approved after two rounds of voting that ended with a final ballot on Saturday.
The vote does not remove and may inflame political tensions in Egypt; many in the opposition feel Mursi's action in pushing through the constitution violated the country's new democracy, and that the document favours Islamists while ignoring the rights of Christians and women. So the vote could be a recipe for further unrest in the long term.
This could complicate the government's efforts to win the domestic consensus on budget cuts and economic policies that it needs to secure a $4.8 billion loan from the International Monetary Fund, some analysts believe.
Nevertheless, investors and traders were relieved that the vote was conducted without severe violence, and saw it as a step towards normalcy and parliamentary elections that could eventually produce a stable government.
After plunging in late November when the crisis over the constitution began, the stock market quickly began recovering and is now roughly back at pre-crisis levels.
Cairo's benchmark index rose in early trade on Sunday, hitting a high of 5,505 points, before pulling back to close 1.5 percent lower at 5,362 points in heavy trade.
One factor encouraging profit-taking was talk, fuelled by a state television report on Saturday night, that central bank governor Farouk El-Okdah might resign.
El-Okdah denied the report but there has been persistent media speculation that he might go, and with the Egyptian pound near eight-year lows against the U.S. dollar, some investors fear his departure could signal a policy change in which the central bank stopped resisting depreciation.
"Some investors were speculating the constitution will fly, while others were worrying the market's positive performance over the last two weeks will not last," said Osama Mourad, chief executive of Arab Finance Brokerage.
"The news of the governor weighed more on the market - it increased uncertainty about the situation of the Egyptian pound and the fiscal policy of the country."
Nevertheless, stock exchange data on Sunday once again showed that while local retail investors were net sellers, foreign investors and non-resident Arab investors were net buyers - a sign of longer-term confidence in the country.
Another sign of confidence was news that Dubai's Majid Al Futtaim was in talks with Egypt's Mansour Group, owned by billionaire Mohammed Mansour, to buy its supermarket business in a deal valued at $200 million to $300 million, according to three sources aware of the discussions.
For such investors, Egypt's demographics and valuations outweigh a large amount of political instability.
Losing stocks outnumbered gainers 28 to one in the 30-stock index on Sunday, while one stock closed flat. Commercial International Bank lost 2.5 percent while Orascom Construction Industries fell 1.6 percent.
In Saudi Arabia and other Gulf markets, turnover was thin because of the approach of the year-end. The Saudi index slipped 0.2 percent, edging away from Saturday's six-week high.
The top two sectors by market value, petrochemical and banks, declined on profit-taking. Saudi Basic Industries Corp (SABIC) and Al Rajhi Bank each shed 0.8 percent.
United Arab Emirates markets extended gains as investors targeted blue chips. Dubai's index rose 0.4 percent to close at 1,607 points, its highest close since Dec. 10.
Blue chip Emaar Properties gained 0.5 percent and Air Arabia rose 2.7 percent. Investors are favouring shares in the budget carrier because of expectations it will pay a 2012 dividend of 7.2 percent.
Shares in Ajman Bank jumped 4.0 percent, rising to its highest level since June 2009, on what traders said was talk that bank would be the subject of a large stake purchase.
Abu Dhabi's benchmark climbed 0.5 percent, ending at 2,631 points, its highest level since Dec. 9.
Technical analysis suggests the index has found support over the past week around the 100-day average, now at 2,614 points. Sunday's rise triggered a minor bullish right triangle with its top at 2,620 points; this points the index up in coming days to at least test resistance around 2,640 points, where the market bottomed in mid-October and late November.
Banks helped gains with First Gulf Bank adding 2.3 percent, once again because of dividend expectations.
"Volumes will slow down going into the new year - people will be focusing on the U.S. fiscal cliff because there are no regional catalysts," said Akber Naqvi, hedge fund portfolio manager at Al Masah Capital. "Whatever happens in the U.S. will determine how our markets close the year and the how they open next year."
* The index lost 1.5 percent to 5,362 points.
The benchmark slipped 0.2 percent to 6,890 points.
* The index gained 0.4 percent to 1,607 points.
* The index rose 0.5 percent to 2,631 points.
* The index slipped 0.2 percent to 8,423 points.
* The index advanced 0.3 percent to 5,701 points.
* The index declined 0.3 percent to 5,963 points.
* The index rose 0.6 percent to 1,042 points.