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* Traders attribute Kuwait gains to state-linked funds
* Shape of Kuwait's next parliament unclear
By Nadia Saleem
DUBAI, June 16 (Reuters) - Kuwait's bourse rose on Sunday on what traders said was buying by government-linked funds ahead of a politically sensitive court ruling. After the close, the court dissolved parliament and called for new elections, bringing fresh uncertainty to the Gulf state.
Most other regional markets fell in heavy selling, dragged down by escalating geopolitical tensions surrounding Syria and the shaky global environment for emerging markets.
Kuwait's measure climbed 0.3 percent, halting a two-session losing streak. The market is still up 34.1 percent year-to-date, in a rally driven mainly by retail investors, who have been encouraged by a government push on economic development and expected improvement in corporate earnings.
The Constitutional Court threw out opposition challenges to changes to the electoral system which had been decreed by the emir. It is not yet clear whether this will prompt a stronger campaign of opposition street protests, or whether the next parliament will be more or less willing to work with the cabinet to implement stalled economic projects.
"There are many people praising this resolution - but my only reservation is that we don't need any more obstruction in the movement of long-overdue economic development," said Fouad Darwish, head of brokerage at Global Investment House.
Darwish said the market outlook would depend on whether the previous parliament was reinstated or new elections took place.
But political uncertainty may trigger government buying through the National Portfolio Fund, established to support the market, he added. "I'm sure the government had its hand in the market to lift prices."
An address to the nation by the emir, expected on Sunday evening, may to some extent clarify the political situation.
Elsewhere, most regional markets retreated. Dubai's benchmark lost 2.3 percent, cutting its 2013 gains to 44.6 percent. Abu Dhabi's measure retreated 0.9 percent.
As the Syria crisis intensified, Egyptian President Mohamed Mursi said he had cut diplomatic ties with Damascus and backed a no-fly zone over Syria. Saudi Arabia's King Abdullah cut short a holiday abroad to deal with the issue of Syria, while the United States said it would keep F-16 fighters and Patriot missiles in Jordan at Amman's request.
"The biggest discount to this region by foreigners is political risks, and although generally this risk is misunderstood and overdone, the situation in Syria is a real threat," said Amer Khan, fund manager at Shuaa Asset Management in Dubai.
The instability in Syria could potentially affect the Suez Canal and therefore oil supplies, he added.
In Doha, the index shed 0.6 percent, its second decline from Wednesday's 57-month high.
The United Arab Emirates and Qatar surged last Wednesday after an announcement by index compiler MSCI that it would upgrade the two countries to emerging market status. But since the markets had already gained sharply this year, the positive impact of the news has been short-lived.
Traders said Qatar was not, however, significantly affected by news that the central bank had tightened its curbs on how much banks could invest in stocks and bonds, lowering the cap to 25 percent of their capital and reserves.
The rules may not have much immediate effect in forcing banks to sell securities because not all banks have reached the limits, and since the time frame for banks to comply is not yet clear.
Egypt's main benchmark fell 1.0 percent, extending 2013 losses to 15.7 percent.
Trading volumes fell to 30 million shares, a three-week low, as investors maintained a risk-averse attitude towards a market with huge economic and political risks.
Saudi Arabia's bourse climbed 0.5 percent, reversing some of its losses from the previous session, when it plunged 4.3 percent in response to the Syria crisis.
* The index gained 0.5 percent to 7,330 points.
* The index dropped 2.3 percent to 2,345 points.
* The index fell 0.9 percent to 3,630 points.
* The index slipped 0.6 percent to 9,424 points.
* The index fell 1.0 percent to 4,604 points.
* The index gained 0.3 percent to 7,955 points.
* The index declined 1.1 percent to 6,484 points.
* The index was flat at 1,199 points.