* Abu Dhabi's UNB, ADCB, ADIB drop after denying merger rumours

* Dubai's Shuaa gains as investors see upside with new acquirer

* Saudi pulls back on profit taking, banks weak

* Egypt resilient as foreign buyers continue to accumulate shares

By Celine Aswad

DUBAI, Nov 20 (Reuters) - Shares of three of Abu Dhabi's top lenders pulled back on Sunday after the banks denied they were in merger talks, while Saudi shares were hit by profit taking.

Egypt's stock market gained as foreign funds continued to accumulate blue chips.

Abu Dhabi's index .ADI dropped 1.7 percent as Union National Bank UNB.AD retreated 5.2 percent and Abu Dhabi Commercial Bank ADCB.AD lost 2.7 percent after both lenders issued separate statements on Sunday denying last week's Bloomberg report that the two lenders were involved in merger talks.

Similarly Abu Dhabi Islamic Bank ADIB.AD pulled back 0.8 percent after the lender said in a bourse statement that it has no merger plans. Bloomberg reported on Wednesday that the bank is in talks to merge with Alhilal Bank.

Shares in the three lenders were suspended earlier on Sunday and trading resumed after their statements.

"The consolidation genie is out of the bottle with the Abu Dhabi government having already announced the merger of two banks and two sovereign funds. This is a sound strategy when trying to cope with a prolonged economic slowdown, so it is unsurprising investors are trying to second guess which companies may be next in line," said Akber Khan, director of asset management at Qatar's Alrayan Investment.

Rumours have been circulating in recent months that as part of an efficiency drive more banking tie-ups might happen in the wake of Abu Dhabi's two largest banking heavyweights, National Bank of Abu Dhabi NBAD.AD and First Gulf Bank FGB.AD pushing ahead with their own merger, expected to be completed in the first quarter of 2017.

On Sunday NBAD closed down 1.0 percent and FGB lost 2.9 percent.

Dubai's Shuaa Capital SHUA.DU jumped 7.5 percent to 1.58 dirhams ($0.43) after the investment firm announced that Abu Dhabi Financial Group (ADFG) had carried out a previously announced acquisition of 48.36 percent of the firm from Dubai Banking Group, a subsidiary of Dubai Group, for 0.705 dirham a share.

Although the purchase price was well below the market price, some investors are betting ADFG will develop Shuaa into a much bigger company.

Dubai's index .DFMGI , however, closed down 0.3 percent with the main drag coming from large-cap shares. Emaar Properties EMAR.DU fell 0.3 percent and telecom operator Du du.du pulled back 0.8 percent.



SAUDI DIPS, EGYPT RESILIENT

Riyadh's main index .TASI retreated 0.9 percent to 6,570 points, pulling away from technical resistance on the July peak of 6,703 points. The index is still up 16.3 percent over the last 30 days.

Banking shares, which have been the chief gainers over that period, were some of the worst performers on Sunday as all but two of the 12 listed lenders closed lower. Banque Saudi Fransi 1050.SE dropped 3.7 percent to 26.10 riyals, it is now trading at par with the mean fair value of analysts polled by Reuters.

"When a market gains about 20 percent in one month some profit taking is a given. Sentiment swung from extreme fear to extreme greed in a short period," said Khan of Alrayan Investment.

Khan added that the rally has been fuelled by institutional investors while Saudi retail investors - which usually make up the majority of trading volumes - have remained sellers.

"As a result, the larger, more liquid names have done very well."

According to exchange data, local mutual funds were aggressive net buyers of Saudi stocks over a one week period to Nov. 17 while retail investors were net sellers.

In Egypt, the blue chip index .EGX30 closed up 0.5 percent, a fresh eight-year high but traded volumes fell by about 30 percent from a record high struck on Thursday.

The index is now up 32.3 percent since the Egyptian pound was floated on Nov. 3 and foreign funds continued to be net buyers of shares on Sunday, bourse data showed.

"Foreign buyers did not relent despite some weakness in the pound," said a Cairo-based broker.

The Egyptian pound EGP= was trading at between 17.30 and 17.45 against the dollar after closing at about 16.05 on Saturday.

Orasom Telecom OTMT.CA , the most traded share, added 5.9 percent and Arabia Cotton Ginning ACGC.CA climbed 6.5 percent.

But real estate investment firm Pioneer Holding Company PIOH.CA fell 1.0 percent after the company posted a 34.8 percent drop in third-quarter net profit, with revenue falling about a fifth for the period.





SUNDAY'S HIGHLIGHTS



SAUDI ARABIA

* The index .TASI edged down 0.9 percent to 6,570 points.

DUBAI

* The index .DFMGI lost 0.3 percent to 3,302 points.



ABU DHABI

* The index .ADI fell 1.7 percent to 4,221 points.



EGYPT

* The index .EGX30 gained 0.5 percent to 11,277 points.



QATAR

* The index .QSI added 0.06 percent to 9,781 points.



KUWAIT

* The index .KSWE fell 0.1 percent to 5,507 points.



OMAN

* The index .MSI edged up 0.5 percent to 5,521 points.



BAHRAIN

* The index .BAX added 0.06 percent to 1,181 points.

($1 = 3.6730 UAE dirham) (Editing by Susan Fenton) ((celine.aswad@thomsonreuters.com; +9715 62247653; Reuters Messaging: celine.aswad.thomsonreuters.com@reuters.net))