UPDATE 1-Kenyan shares hit 20-month high on Q3 earnings bet

* Kenya Airways, Safaricom shares lead bourse higher
* Main share index up 28 pct in the year-to-date
* Shilling seen pressured by end-month dollar demand

(Adds markets close, stocks)
By Kevin Mwanza
NAIROBI, Oct 25 (Reuters) - Kenyan shares hit a 20-month
high on Thursday, propelled by gains in blue chip firms that
investors bet will post strong third quarter results. The
shilling finished the day unchanged against the dollar.
The main NSE-20 Share Index rose 0.6 percent to
close at 4,119.50 points, a level last seen in early March 2011.
The index has rallied 27.8 percent this year, making it one
of Africa's best performers this year as the bourse recovers
from a slump in 2011. Shares have been boosted by investors
returning from a slowing debt market and by interest rate cuts
as inflation falls steadily.
Kenya Airways, one of Africa's leading airlines, rose 2.9
percent to 12.40 shillings buoyed by expectations that it will
benefit from the exit of British-based Virgin Atlantic Airways
and Bahrain's Gulf Air from the Kenyan
market.
Telecoms operator Safaricom added 2.4 percent to
close at 4.35 shillings a share - a 21-month high - as investors
forecast first half results would be up on last year.
"Safaricom have managed to grow their revenue despite
falling market share because of the pricing and product
diversity. Investors are reading this positively," said Ronald
Lugalia, an analyst at Afrika Investment Bank.
Safaricom's results for the first half ended September are
expected in the next two weeks.
In the currency market, commercial banks quoted the shilling
at 85.00/20 per dollar at the close of the market, barely
changed from Wednesday's close of 85.02/25.
"We may see the shilling tick up (weaken) a bit if importers
come to buy dollars. But ordinary flows will not turn the tide,"
said Christopher Muiga, a senior trader at Kenya Commercial
Bank.
Traders expect importers to step up dollar buying to meet
end-month obligations early next week.
The shilling has been fairly stable this year, supported by
the central bank's tight monetary policy, under which it has
regularly mopped up liquidity via repurchase agreements (repos).
The banks mopped up 12.45 billion shillings ($146 million)
from the market on Thursday, after it received 12.95 billion
shillings for the 10 billion it had offered in repos.
"The central bank has been ... playing its cards very well,"
said Robert Gatobu, a trader at Bank of Africa.
In the debt market, the weighted average yield on the
benchmark 91-day Treasury bills rose to 9.945 percent at the
auction, from 9.437 percent last week.
Government and corporate bonds worth 3.5 billion shillings
were traded, down from 3.9 billion shillings on Wednesday.
DEBT>.....................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 = 85.2000 Kenyan shillings)

(Editing by Richard Lough/Ruth Pitchford)