* UAE, Qatar bourses recover after dipping on foreign selling
* Emaar at six-year high ahead of malls unit's IPO
* Lifts Dubai above 5,000-point mark
* Saudi bourse continues uptrend
* But analysts say market may be overheating
By Olzhas Auyezov
DUBAI, Aug 31 Bourses in the United Arab Emirates and Qatar rebounded on Sunday while Dubai developer Emaar Properties surged after the firm said it would launch an initial public offer for its malls unit next month.
Stock markets in both countries had dipped in the previous session as passive funds tracking MSCI's frontier market index liquidated part of their holdings of UAE and Qatari stocks. MSCI upgraded the UAE and Qatar from frontier to emerging market status in May and arranged for frontier funds to exit those countries through a series of monthly sales, one of which took place at the end of last week.
Qatar's bourse, which dropped 3.1 percent on Thursday, bounced 1.1 percent on Sunday as stocks that were the main drags in the last session became the main supports.
Islamic lender Masraf Al Rayan jumped 6.4 percent and mobile phone operator Ooredoo surged 7.2 percent.
At the same time, three stocks that attracted foreign buyers last Thursday because of a planned end-August increase of their weights in MSCI's emerging market index - Qatar National Bank , Industries Qatar and Qatar Islamic Bank - fell 4.2, 1.9 and 2.4 percent respectively.
Abu Dhabi's bourse rose 0.2 percent on the back of its heaviest MSCI index components. National Bank of Abu Dhabi rose 0.7 percent and First Gulf Bank added 1.1 percent.
Dubai's index jumped 2.7 percent and closed above 5,000 points for the first time since early June thanks to Emaar, the emirate's largest listed developer, which surged 8.8 percent to 11.15 dirhams, its highest close since March 2008.
The company said on Sunday that it would launch an IPO for its malls unit next month in what will be the emirate's largest share sale in recent years. Emaar plans to sell at least 15 percent of the malls and retail unit on the Dubai Financial Market and to list the shares in October, a spokesman told Reuters.
Earlier this year, Emaar said it would sell up to 25 percent of the unit in an offer likely to raise 8 to 9 billion dirhams ($2.18-$2.45 billion) and use the cash to pay a special dividend to its shareholders.
Saudi Arabia's bourse, boosted by regulators' plans to open it to direct foreign investment early next year, which were announced last month, continued to climb, rising 0.6 percent to a fresh six-year high of 11,112 points.
Al Rajhi Bank and Saudi Kayan Petrochemical Co were the main supports, adding 2.5 and 4.5 percent respectively. Food producer Savola Group, up 1.2 percent, and utility firm Saudi Electricity Co, which rose 2.6 percent, also buoyed the benchmark.
"Across the board there's interest from local and regional investors to participate and position prior to the opening of the market," said Marwan Shurrab, fund manager and head of trading at Vision Investments in Dubai.
But some analysts say the market is becoming stretched.
"There are already signs that the...index is moving towards being overheated, having risen over 10 percent since the announcement on July 21," Riyadh-based Jadwa Investment said in a note on Sunday.
"It is important to highlight, however, that the surge in optimism fuelling the current TASI rise is not based wholly on speculative gain or positive sentiment - it is also a due to a flourishing Saudi economy, which is underpinned by strong economic fundamentals."
The monthly Reuters survey of Middle East investment funds, published on Sunday, found them still bullish on Saudi equities, though somewhat less so than in the previous survey. Managers were also positive, to a lesser degree, on stock markets in Qatar, the United Arab Emirates and Egypt.
Egypt's bourse edged up 0.1 percent on Sunday on the back of blue chip Commercial International Bank, up 0.6 percent, and brokerage Pioneers Holding, which gained 2.8 percent.
* The index rose 1.1 percent to 13,597 points.
* The index jumped 2.7 percent to 5,063 points.
* The index edged up 0.2 percent to 5,083 points.
* The index rose 0.6 percent to 11,112 points.
* The index climbed 0.1 percent to 9,447 points.
* The index added 0.4 percent to 7,431 points.
* The index climbed 0.1 percent to 7,367 points.
* The index slipped 0.2 percent to 1,472 points. (Editing by Andrew Torchia)