* Saudi market had surged before FTSE decision
* Profit-taking is moderate, little downside seen
* Other Gulf bourses may get some relief from fund outflows
* Kuwait blue chips climb ahead of FTSE index inclusion
* Aramex surges in Dubai after positive analyst report
By Andrew Torchia
RIYADH, March 29 (Reuters) - Saudi Arabia's stock marketfell back because of moderate profit-taking on Thursday afterindex compiler FTSE Russell decied to upgrade Riyadh to emergingmarket status, a move likely to draw billions of dollars of newforeign money.
Most other Gulf markets gained, after being being depressedin recent weeks by funds flowing to Riyadh in anticipation of apositive decision by FTSE.
Inclusion in FTSE's emerging market index is expected to putSaudi Arabia on the map for many international fund managers. Ifrival index compiler MSCI also decides in June to upgradeRiyadh, over $30 billion could flow in over the next couple ofyears.
But FTSE inclusion will only take effect in stages betweenMarch and December 2019; only then will passive funds linked tothe index begin flowing in. Also, the Saudi market had alreadyrisen over 9 percent this year in anticipation of FTSE'sdecision, leaving stocks vulnerable to profit-taking.
As a result, the Saudi stock index fell 0.4 percenton Thursday as blue chips languished. Saudi Basic Industriesdropped 0.8 percent and Saudi Arabian Mining Colost 1.2 percent, although Al Rajhi Bankrose 0.5 percent.
A monthly Reuters poll of Middle East fund managerspublished on Thursday found 46 percent expected to raise theirSaudi equity allocations over the next three months and 23percent to reduce them.
That balance was significantly below the result of theprevious two polls, in which 69 percent expected to raiseallocations to Saudi Arabia and none to cut them.
In Kuwait, which FTSE will upgrade to emerging market statusin September, the index was 0.5 percent higher on theback of several top blue chips.
National Bank of Kuwait climbed 2.2 percent, Zainwas up 1.9 percent and Agility added 1.1percent. All three are on an indicative list of 10 stocks whichare likely to join FTSE's emerging market index. FTSE publishedthe list on Wednesday and will release a final list on Aug. 24.
Qatar's index gained 0.2 percent as Doha Insuranceadded 4.7 percent, although Qatar First Bankdropped 4.6 percent after reporting that its annual net losswidened slightly from the previous year.
In Dubai, the index rose 0.6 percent in abroad-based rally, with gainers outnumbering losers by 26 toseven. Blue chip Emaar Properties bounced 1.4 percentafter trading near 22-month lows in recent days.
Courier Aramex surged 3.3 percent to 4.40 dirhams.In a report released on Thursday, AlphaMena raised itsassessment of the stock to "buy" with a six-month price targetof 5.30 dirhams, citing the company's fast-growing InternationalExpress segment and its acquisitions.
A 2.6 percent climb by First Abu Dhabi Bank, thatemirate's biggest lender, helped to lift the Abu Dhabi index0.8 percent.
Egypt's index gained 0.8 percent as real estatefirm Palm Hills rose sharply for a second straightday, last trading up 9.8 percent. It has been buoyed by apresidential decree this month that reclassified agriculturalland along the Cairo-Alexandria Desert Road for urbancommunities.
The Reuters poll found 54 percent of fund managers expectedto raise their equity allocations to Egypt and none to reducethem - the most positive balance towards that country sinceFebruary 2014. They cited an improving macroeconomic outlook andpolitical stability, with elections this week set to givePresident Abdel Fattah al-Sisi a second term.
SAUDI ARABIA
* The index fell 0.4 percent to 7,871 points.
DUBAI
* The index rose 0.6 percent to 3,109 points.
ABU DHABI
* The index gained 0.8 percent to 4,585 points.
QATAR
* The index added 0.2 percent to 8,574 points.
EGYPT
* The index climbed 0.8 percent to 17,450 points.
KUWAIT
* The index gained 0.5 percent to 6,633 points.
BAHRAIN
* The index rose 0.3 percent to 1,318 points.
OMAN
* The index was flat at 4,774 points.(Editing by Andrew Roche)
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