MIDEAST STOCKS-Markets sell off after China hits oil; Saudis down 2.9 pct – Reuters

 * Saudi Arabia drops as state spending seen moderating     * Healthcare bucks trend on mandatory insurance for visitors     * Dubai falls below chart support     * Qatar suffers less, buoyed by MSCI weighting increase     * Egypt's index drops to 1 1/2-year low      By Olzhas Auyezov     DUBAI, Aug 18 Major Middle East stock markets plunged on Tuesday after tumbling Chinese equities put pressure on global oil and commodity prices.     Chinese stocks fell more than 6 percent on Tuesday as the yuan weakened against the dollar, raising fears that Beijing may further devalue its currency. That could decrease China's consumption and imports.       Saudi Arabia's main stock index fell 2.9 percent to a seven-month closing low of 8,197 points.     The index fell this week below technical support around 8,500 points, where it had bottomed in March and April. That triggered a double top formed by the March and April peaks, which points to December's low of 7,226 points in coming months.     The economics department of local lender Samba Financial Group said in a report on Tuesday government spending had supported Saudi economic activity throughout the first half of this year despite oil's plunge.     "However, the picture has begun to change recently with the persistence of low oil prices now beginning to have an impact on government spending, confidence and private activity," it said.     "We expect a weaker trajectory of spending (in fact, a half-on-half contraction seems likely) as we move through the rest of 2015 and into 2016."     London-based Capital Economics said in a report the Saudi economy appeared to be growing at an annual rate of more than 5 percent at the end of the second quarter, buoyed by rising oil output. But the impending return of Iranian oil to the market after the lifting of sanctions meant Riyadh was likely to have little scope to raise oil output further.      Meanwhile, fiscal policy looks set to become less supportive, so economic growth is set to slow to around 1.5 percent in 2016, below analysts' consensus expectations of 2.5 percent, it argued.     Petrochemicals giant Saudi Basic Industries, for which China is an important market, fell 1.7 percent. Saudi Arabian Mining Co (Ma'aden) tumbled 5.8 percent as the Chinese equities rout depressed metals prices.     Many Saudi small-caps, especially insurance companies, fell their daily 10 percent limits.     Halthcare was the only bright spot. Health insurance will become mandatory for most visitors to the kingdom in the fourth quarter, the local newspaper Al-Watan reported, citing the supervisory body Council of Cooperative Health Insurance.     Dallah Healthcare added 0.6 percent, Saudi Pharmaceutical Industries rose 0.4 percent and Mouwasat Medical Services edged up 0.2 percent.          UAE, EGYPT     Dubai's index dropped 2.5 percent to a four-month low of 3,828 points, falling below technical support at its May low of 3,913 points.     Builder Arabtec, which posted its third quarterly loss in a row this week, suffered one of the biggest price falls, tumbling 4.6 percent.     The most traded stock, heavyweight developer Emaar Properties, dropped 3.0 percent. Stock exchange data showed selling pressure in Dubai mostly came from foreign and institutional investors.     Abu Dhabi's main index fell 2.0 percent, its biggest daily loss since early January. Abu Dhabi National Insurance Co , which this month said it had swung to a loss in the first half of 2015, sank its daily 10 percent limit.     Qatar's market slipped 0.6 percent, still supported by expectations of more foreign investment after its weighting in MSCI's emerging markets index was increased. Ezdan Holding, one of the stocks whose weighting will be boosted at the end of August, climbed 0.2 percent.     Egypt's leading index dropped 2.6 percent to 7,398 points, its lowest close since February 2014, falling below chart support at its July low of 7,527 points.     Although Egypt is a net oil importer and should benefit from lower oil prices, its close economic ties with the Gulf - including overlapping investor bases - have led the Cairo bourse to move in sync with the Gulf in the last few days.          TUESDAY'S HIGHLIGHTS          SAUDI ARABIA     * The index slid 2.9 percent to 8,197 points.          DUBAI     * The index dropped 2.5 percent to 3,828 points.          ABU DHABI     * The index fell 2.0 percent to 4,540 points.          QATAR     * The index edged down 0.6 percent to 11,671 points.          EGYPT     * The index dropped 2.6 percent to 7,398 points.          KUWAIT     * The index slipped 0.02 percent to 6,195 points.          OMAN     * The index lost 0.5 percent to 6,191 points.          BAHRAIN     * The index fell 0.2 percent to 1,329 points.   (Editing by Andrew Torchia, Larry King) 

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