UPDATE 1-Kenyan shilling firms vs dollar, shares slip

* Shilling's outlook remains bearish

* Stocks' bull run expected to continue

(Recast with markets close, stocks)

By Kevin Mwanza

NAIROBI, Oct 12 (Reuters) - The Kenyan shilling

firmed on Friday as banks sold dollars ahead of the weekend, butthe local currency's outlook remained bearish due to importerdemand for the greenback.

Kenyan shares slipped, led by fuel company KenolKobil

, which extended losses that have been triggered bydisappointing earnings results.

At the 1300 GMT market close, commercial banks quoted theshilling at 85.00/20 to the dollar, slightly firmer thanThursday's close of 85.10/30.

"We saw some position squaring by interbank players todaythat helped the shilling a bit. But it could weaken next week onimporters' dollar demand," said a trader at a commercial bank.

Traders see the shilling weakening in the medium term as anaggressive rate-cutting cycle filters through the economy andpolitical uncertainty rises as the east African nation headstowards a general election next March, the first since violenceerupted after a disputed presidential poll in 2007.

The central bank has cut the benchmark rate

twice since July by a total 500 basis points to 13 percent,after holding at an ultra-high 18 percent for seven straightmonths to reign in high inflation and foreign exchangevolatility.

The next rate setting meeting is scheduled for Nov. 7.

"If the central bank cuts the rate at the meeting next monththe shilling will depreciate further ... but not very drastic asdemand slows down towards the December festive season," saidJulius Kiriinya, a trader at African Banking Corporation.

On the stockmarket, the main NSE-20 share index

inched 0.05 percent lower to end the week at 3,995.03 points, ina slow session that saw turnover more than halve from theprevious day to 167 million shillings.

"The NSE dips have been mostly on low volumes, while its upshave been on massive trades ... that means this year's bull runis still on course," said Ronald Lugalia, an analyst at AfrikaInvestment Bank.

Kenyan shares have rallied 25 percent this year as theyrecovered from a slump in 2011 and boosted by investorsreturning from a slowing debt market and by interest rate cuts.

KenolKobil, Kenya's largest fuel firm by sales, extended itsfall by 1.7 percent to 14.15 shillings a share.

The oil firm's shares have dropped 5.7 percent this week onpoor results and investor fatigue over the conclusion of atakeover deal by Switzerland-based Puma Energy.

In the debt market, bonds worth 4.2 billion shillings weretraded, up from 1.9 billion shillings on Thursday.

...........................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

...........................African economic news

.................................NSE-20 Share Index

.................................NSE All Share Index

...........................FT NSE Kenya 15 Index

.......................... FT NSE Kenya 25 Index

SPEED GUIDES:

(Editing by James Macharia and Susan Fenton)

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Keywords: KENYA MARKETS/