MIDEAST STOCKS-Banks, petchems drag down Saudi, property lifts Dubai

    * Saudi Enaya falls as accumulated losses increase
    * Arriyadh Development, Leejam drop on trading ex-dividend
    * Dubai Arabtec surges on potential merger
    * Egypt's blue-chip index rises after inflation data
    * Banks strong in Qatar 

    By Shakeel Ahmad
    Sept 10 (Reuters) - Saudi Arabian stocks dropped sharply on
Tuesday as banking and petrochemical shares weakened, while
builder Arabtec Holding posted its sharpest single-day
rise in two and half years after announcing a potential merger,
helping to lift the Dubai index.
    Saudi's index was down 1.1%. Al Rajhi Bank
dropped 2% and petrochemical maker Saudi Basic Industries
 shed 2.8%.
    Saudi Enaya Cooperative Insurance lost 4.9% after
its accumulated losses reached 40% of its capital. 
    Real estate firm Arriyadh Development and gym
network operator Leejam Sports shed 3.3% and 2%
respectively as the stocks traded ex-dividend.
    Tuesday's losses have left the index trading at meagre gains
of 1.5% for the year. It jumped as much as 20% in May, led by
foreign investors who have been net buyers every month this year
as Saudi stocks joined the MSCI and FTSE Russell emerging market
    The market remains under pressure with the kingdom's economy
at risk of contraction and Middle East funds planning to reduce
investment in Saudi Arabia.
    In Dubai, the index rose 0.4%, with its largest
listed developer Emaar Properties gaining 0.6%.
    Arabtec Holding soared 11.3%, its biggest single-day gain
since February 2017. The firm said on Tuesday it had begun a
review to explore the possibility of merging its construction
business with Abu Dhabi's private rival Trojan Holding.
    The builder's shares traded at 1.77 dirhams, down from 28.73
dirhams at their mid-2014 peak when property prices began to
head downwards.
    Dubai property prices have tumbled 25-35% since mid-2014,
and are expected to decline further this year and next amid a
slowing economy and an oversupply of housing units.
    The Abu Dhabi index was up 0.4% with Aldar properties
 adding 1.8%. The firm this week said it was launching
a residential project on Saadiyat island that would be open to
all nationalities.
    This is the first development on Saadiyat island since
April, when Abu Dhabi amended its real estate law to allow all
foreigners to own land and property in investment areas on a
freehold basis.
    Qatar's index traded 0.7% higher lifted by gains in
financials with Qatar National Bank adding 1.2%. 
    Egypt's blue-chip index closed 0.5% higher after
its inflation rate declined to 7.5% in August, the lowest in
years as the country approaches the end of International
Monetary Fund-backed economic reform programme that during 2017
saw inflation rise to a high of 33%.
    The inflation data clears the way for further rate cuts when
the central bank meets later this month after having delivered a
rate cut in August. 

 SAUDI ARABIA  The index         fell 1.1% to 7,965 points
 ABU DHABI     The index        was up 0.4% to 5,096 points
 DUBAI         The index          rose 0.4% to 2,892 points
 QATAR         The index        was up 0.7% to 10,376 points
 EGYPT         The index          was up 0.5% to 14,956 points
 OMAN          The index        was up 0.3% to 3,998 points
 KUWAIT        The index        edged up 0.1% to 6,424 points
 Bahrain       The market was closed for a public holiday

 (Reporting by Shakeel Ahmad in Bengaluru, editing by Ed Osmond)