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MIDEAST STOCKS-Abu Dhabi hits multi-year peak, blue-chip banks lift Qatar

* Abu Dhabi's FAB records best day in nearly 3 years * Qatar on track for best day since Aug 2018 * Dubai's DP World jumps on higher FY profit * Saudi's Al Khodari surges after dissolution voted down By Shakeel Ahmad and Abinaya Vijayaraghavan March 14 (Reuters) - The Abu Dhabi stock market climbed sharply on Thursday for its biggest one-day gain in nearly three years while Qatar was lifted by its blue-chip banks to its best day in seven months.

The Abu Dhabi index rose 3.7 percent. First Abu Dhabi Bank (FAB), the United Arab Emirates' biggest bank, surged 6.5 percent and Emirates Telecommunications added 5.2 percent.

With FTSE and S&P index rebalancing ataking place across emerging markets on Thursday there were sizeable inflows into heavyweights First Abu Dhabi and Emirates Telecommunications, which account for about 70 percent of the Abu Dhabi index, said Mohamad Al Hajj, head of MENA equity strategy for EFG Hermes.

Late last month FAB shareholders approved an increase in the limit of foreign ownership to 40 percent of its shares, up from 25 percent.

FAB expects the MSCI to reflect the foreign ownership limit's increase during its May index review, Arqaam Capital said, adding that the brokerage expects about $615 million of inflows from MSCI and $275 million from FTSE.

Qatar's index rose 2.1 percent, with Industries Qatar , the stock with the biggest weighting on the index, climbing 3 percent and Qatar Islamic Bank up 3.2 percent.

The index is down 4.8 percent this year, lagging behind Gulf peers. This is in sharp contrast to last year, when the index was one of the world's best-performing markets after the raising of the limit on foreign ownership of Qatari stocks.

Some analysts consider the market to be overvalued, with other regional markets offering better valuations.

In Dubai, the index fell 1 percent. Dubai Islamic Bank lost 6.5 percent as the stock traded ex-dividend.

Banks in the UAE are expected to suffer a rise in loan losses over the next 12 to 18 months as a decline in real estate prices and rising interest rates reduce borrowers' cashflows, according to Moody's.

But DP World, the Dubai-Nasdaq listed port operator, climbed 6.2 percent in light trade after posting 2018 profit up 10.2 percent.

Saudi Arabia's index was up 0.7 percent, with Al Rajhi Bank gaining 0.9 percent.

Saudi Basic Industries (SABIC), the Middle East's largest petrochemicals maker, rose 1 percent after announcing on Wednesday that it will merge its Saudi Petrochemical Co and Arabian Petrochemical Co businesses.

The deal, due to complete in the second half of the year, is part of SABIC's efforts to increase efficiency globally.

Abdullah Abdul Mohsin Al Khodari Sons rose 10 percent after its shareholders voted down dissolution of the company and instead approved capital restructuring.

Egypt's blue-chip index was down 0.9 percent, with Commercial International Bank shedding 1.9 percent and El Sewedy Electric slipping by 1.7 percent.

The index has gained 15 percent so far this year, compared with an 8.8 percent gain for the MSCI's index of developing world stocks.

SAUDI The index rose 0.7 pct to 8,583 points ARABIA ABU DHABI The index rose 3.7 pct to 4,998 points DUBAI The index fell 1 pct to 2,574 points QATAR The index rose 2.1 pct to 9,971 points EGYPT The index fell 0.9 pct to 14,991 points KUWAIT The index rose 1.2 pct to 5,667 points OMAN The index was flat at 4,075 points BAHRAIN The index fell 0.2 pct to 1,409 points (Reporting by Shakeel Ahmad and Abinaya Vijayaraghavan in Bengaluru Editing by David Goodman)