UPDATE 4-Qatar Barclays stake sale stokes Sainsbury talk

* Qatar sells $2.3 bln stake in Barclays, near $1 bln profit

* Fuels talk Qatar set to move on Sainsbury

* Qatar still top Barclays investor, and has more warrants

* Barclays shares down 5.4 pct; Sainsbury up 5.09 pct

(Adds confirmation of share sale)

By Steve Slater and Mark Potter

LONDON, Oct 20 (Reuters) - Qatar sold a 1.4 billion pound ($2.3 billion) stake in British bank Barclays (BARC.L) on Tuesday, stoking market expectations it will use a big profit to make a move on UK food retailer J. Sainsbury (SBRY.L).

Qatar owns 26 percent of Sainsbury and the retailer's shares jumped by a fifth last Thursday on talk the sovereign wealth fund was planning a renewed offer for it. A previous bid attempt failed in 2007. [ID:nLF602741]

Qatar Holding made a profit of about 600 million pounds ($985 million) by exercising half its warrants in Barclays and selling the shares.

It remains the bank's biggest shareholder, and is the second Middle-Eastern investor to make a big profit from Barclays this year, after Abu Dhabi made $2.5 billion on the sale of an 11 percent stake in June.

By 1338 GMT Barclays shares were down 5.4 percent at 361.35 pence. The Barclays share price has been on a steady rise since it hit a low of 55 pence in March 2009.

The shares were sold by Credit Suisse (CSGN.VX) through an accelerated bookbuild at 360 pence apiece.

Sainsbury shares were up 5.09 percent at 346.75p, valuing Britain's third biggest supermarket group at 6.3 billion pounds.

The Qatar Investment Authority (QIA) was mulling an offer at 420p per Sainsbury share, traders said last week, well below its 2007 proposal of 600p a share.

"I think around 5 pounds would be a more realistic price than the one people were talking about last week," said S&P Equity Research analyst James Monro.

Other analysts agreed a bid would need to be pitched at 500p or above, citing attractive property assets, an ambitious growth plans and the 15 percent stake still held by the Sainsbury family. [ID:nLG568012]