UPDATE 1-Kenyan shilling weakens on rate cut concerns

* Shilling could slide more if central bank makes big rate
cut
* Mumias shares lead main stocks index down

(Adds markets close, stock)
By Kevin Mwanza and Beatrice Gachenge
NAIROBI, Sept 3 (Reuters) - The Kenyan shilling
weakened on Monday as investors anticipating a big interest rate
cut from the central bank on Wednesday bought dollars, while
stocks edged lower for the third straight session.
The shilling closed Monday's session at 84.20/40 per dollar,
weaker than Friday's close of 84.10/20.
All nine analysts polled by Reuters expect the Central Bank
of Kenya to cut its policy rate after year-on-year
inflation fell sharply in August to 6.09 percent,
the lowest since January 2011.
"The (end-year) core inflation numbers are expected to now
be firmly below (the targeted) 9 percent, which gives the
monetary authority the incentive to loosen monetary policy,"
said Alex Muiruri, a trader at Africa Alliance Investment Bank.
However, a more-aggressive-than-expected loosening, they
said, might trigger a knee-jerk weakening of the currency if
speculators bet on importers using cheaper credit to ramp up
their demand for dollars and commercial banks extending long
dollar positions.
"We expect the shilling to weaken immediately (after) they
cut, but that won't last because the shilling is well supported.
The central bank might come in if the shilling falls
drastically," said Robert Gatobu, a trader at Bank of Africa.
The central bank continued to mop up liquidity through
repurchase agreements (repos), taking out 1.15 billion shillings
($13.7 million) after it offered 3 billion shillings on Monday.

At the Nairobi Securities Exchange, the NSE-20 Share Index
inched lower for the third session, down 0.3 percent to
3,855.14 points, dragged down by Mumias Sugar.
The country's leading sugar miller, which traded the highest
volume among the losers, dropped by 2.7 percent to 6.20
shillings as disappointed retail investors dumped the stock
after it reported a 33 percent fall in pretax profits. [ID:
nL6E8JV1IY]
"Investors are not happy with the full year results. The
results did not meet the expectations of the investors," said
Ronald Lugalia, an analyst at Africa Investment Bank.
Trading in government and corporate bonds nearly doubled to
4.30 billion shillings on Monday from 2.94 billion shillings the
previous session.
...........................Shilling spot rates
.....................Shilling forward rates
.......................Cross rates
..................................Local contributors
.......................Central Bank of Kenya Index
.....................Kenyan Bonds contributor pages
...............Treasury bill yields
..................Central bank open market operations
.........................Horizontal repo transactions
, ................Daily interbank lending rate
.............................Kenya Bond pricing
..................Real time Africa economic data
<ECI & AFR> ...........................African economic news
.................................NSE-20 Share Index
.................................NSE All Share Index
...........................FT NSE Kenya 15 Index
.......................... FT NSE Kenya 25 Index
SPEED GUIDES:

($1 = 84.0500 Kenyan shillings)

(Editing by Yara Bayoumy)