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UPDATE 1-D.Boerse says adds Continental to DAX, drops MLP

(Adds detail, analyst comment, MDAX and TecDAX changes)

FRANKFURT, Aug 19 (Reuters) - German stock exchange operator Deutsche Boerse said on Tuesday it would add tyremaker Continental to Germany's blue-chip index DAX , replacing financial services company MLP .

The decision ends a neck-and-neck race to join the index between Continental, which was a DAX member from 1988 to 1996, and Internet provider T-Online International . Experts said some investors would have to rejig their portfolios now.

"That was such a tight race that not many investors will have been able to position themselves in advance," said Georg Elsaesser, index strategist at HSBC Trinkaus & Burkhardt. "In the short term, the Continental share should benefit from that."

Inclusion in the DAX often bolsters a company's share price by making it a must-have for those fund managers with funds that track the blue-chip index's performance.

Experts estimate that up to 33 billion euros ($36.5 billion) are invested in funds mirroring the DAX or using it as a benchmark.

A Deutsche Boerse spokeswoman said after a meeting of the operator's index committee that the higher free float was the main reason to prefer Continental over T-Online, in which German telecoms giant Deutsche Telekom owns 71.9 percent.

Analysts said Continental's promotion to the DAX could soften the prevalence of technology heavyweights in the blue chip index, which already includes Deutsche Telekom, technology giant Siemens and software maker SAP .

"The DAX will benefit from that because a more stable, less volatile stock joins the index," said Claudia Volk, index strategist at brokerage WestLB.

"It is currently dominated by traditionally more volatile technology stocks, which make the index swing strongly. Conti could cushion that a bit."

MLP's market capitalisation had dropped too far for it to remain a component of Germany's 30-strong blue-chip index, Deutsche Boerse said. It ranked 44th in market value among listed German companies at the end of July.

Deutsche Boerse also said it would add online brokerage comdirect to its mid-cap index MDAX , replacing computer maintenance firm Teleplan .

Internet provider Freenet , telecoms firm Teles and semiconductor firm Suess MicroTec will be promoted to the TecDAX index, replacing Plambeck , Medigene and Nordex .

Deutsche Boerse's decisions are due to take effect on Sept. 22. The next index revision is due on November 18.