* Qatar Islamic Bank sinks; dependence on Gulf deposits
* Buying opportunity for some cheap Qatari shares
* Abu Dhabi's Dana Gas jumps on receipt of Egypt payments
* Saudi trading volumes rise as MSCI decision nears
* Ezz Steel surges as Egypt imposes import tariff
DUBAI, June 7 (Reuters) - Qatar's stock market fell for a third straight day on Wednesday, hit by the breaking of diplomatic ties with its neighbors, though the pace of the drop slowed.
Dubai's Emaar Properties jumped on a plan for an initial public offer by one of its units.
The Qatari index lost 1.0 percent to a fresh 17-month low, taking its losses to 9.7 percent since Saudi Arabia, the United Arab Emirates and Egypt cut diplomatic links and transport ties on Monday, accusing Doha of backing terrorism.
A little over one-sixth of total traded value came from other Gulf investors, more than the usual 5 to 10 percent - suggesting some Gulf investors were liquidating assets in Qatar. Other foreign funds also traded actively, bourse data showed.
The Qatari riyal slipped to an 11-year low of 3.6517 against the dollar in the spot market on Wednesday, according to Thomson Reuters data, another sign of capital outflows.
Qatar Islamic Bank slumped 8.2 percent to 89 riyals, its lowest close since January 2016, in heavy trade. It is one of the Qatari banks most dependent on deposits from other Gulf states, obtaining a quarter of its deposits from that source, said Olivier Panis, analyst at Moody's.
On Wednesday, 23 other shares fell but 12 advanced, including telecommunications operator Vodafone Qatar, up 1.6 percent to 7.74 Qatari riyals.
After sharp falls in stocks, "there is value there, and although the political situation is not encouraging, there are some good buys," said a regional equities fund manager. Reflecting the political tensions, he declined to be named.
However, many money managers said that the longer the diplomatic crisis lasted, the higher the risk premium demanded by foreign foreign investors in Qatar would go.
"Tensions are still high and mediation efforts by fellow Gulf Cooperation Council state Kuwait have yet to lead to a concrete solution, so investors will likely remain on edge," said a Dubai-based trader.
EMAAR PROPERTIES, EZZ STEEL
In Dubai, the largest listed real estate developer Emaar Properties surged 8.6 percent in its heaviest trade since April 2015 after it said it planned to offer up to 30 percent of its United Arab Emirates real estate development business in an initial public offer. Subject to market conditions, funds raised through the IPO would be distributed to shareholders of Emaar.
The company said the IPO would be Dubai's largest since its flotation of Emaar Malls, which raised 5.8 billion dirhams ($1.58 billion) in 2014 and was heavily oversubscribed. Emaar Malls was up 1.6 percent.
The Dubai index climbed 2.5 percent, its largest single-day gain since December 2016.
In Abu Dhabi, Dana Gas rocketed 10.9 percent in very heavy trade after saying it had received $40 million from the Egyptian government towards its outstanding receivables; its current receivables balance in Egypt now stands at $187 million.
The Abu Dhabi index, however, fell 0.1 percent, weighed down by a 1.4 percent decline of shares of the largest listed bank, First Abu Dhabi Bank.
The Saudi Arabian index rose 0.2 percent in the heaviest trading volume this year as 87 shares rose and 63 declined.
Buying of Saudi stocks favored by foreign funds, in anticipation of a decision by MSCI on June 20 to begin reviewing Riyadh for possible inclusion in its emerging market index, has buoyed the market in recent days.
Dairy producer Almarai rose 0.6 percent and its largest shareholder Savola Group added 0.7 percent, to its highest close in 17 months.
In Cairo, the index edged up 0.1 percent in its 12th consecutive session of gains to a fresh all-time high.
Ezz Steel soared 7.5 percent after the trade ministry imposed a temporary import tariff on rebar steel from China, Turkey and Ukraine to protect local manufacturers suffering from losses. The decision is valid for fourth months.
* The index added 0.2 percent to 6,946 points.
* The index jumped 2.5 percent to 3,406 points.
* The index edged down 0.1 percent to 4,454 points.
* The index lost 1.0 percent to 8,965 points.
* The index edged up 0.1 percent to 13,633 points.
* The index added 0.3 percent to 6,820 points.
* The index fell 0.3 percent to 1,321 points.
* The index lost 0.6 percent to 5,377 points. (Editing by Andrew Torchia)