* Shilling eases slightly on energy, manufacturing demand

* Stocks end higher, Safaricom helps

(Adds shilling closing level, stocks, bonds)

By George Obulutsa

NAIROBI, Sept 2 (Reuters) - The Kenyan shilling KES= eased slightly on Tuesday on end-of-month dollar demand, while stocks closed higher on news of an acquisition by telecoms firm Safaricom SCOM.NR .

At the close of trade, commercial banks quoted the shilling at 88.60/70 to the dollar, compared with Monday's close of 88.50/60.

"There was some end-month dollar demand that came through, mainly from oil and also manufacturers. At the same time there were no dollar inflows from tea," said Martin Runo, senior trader at Chase Bank.

Runo said the shortage of local currency in the market had eased somewhat, leading to the emerging dollar buying.

Traders said the central bank took back the 30 billion shillings it had injected last week using reverse repurchase agreements into a tight money market last week.

The bank stayed out of the market on Tuesday.

Traders said the liquidity conditions had improved due to government departments starting to spend money from the 2014/15 (July-June) fiscal budget.

Delays by the government to release funds to departments and local authorities led to a liquidity crunch, leading to overnight borrowing rates on the interbank market shooting up.

Traders said they forecast the shilling to trade in the 88.20-89.00 range in coming days.

On the Nairobi Securities Exchange, the main NSE-20 Share Index .NSE20 was up 0.4 percent or 22.29 points to close at 5,163.21 points.

Safaricom, which has a heavy weighting on the benchmark NSE-20 share index, rose 0.4 percent to close at 13.20 shillings. The stock had jumped to an intra-day high of 1.9 percent earlier to 13.40 shillings in the session, a level it last hit in mid-April.

The company, alongside the Kenyan unit of Bharti Airtel BRTI.NS have signed agreements to buy assets of another local telecoms firm, yu Mobile. ID:nL3N0R00BU

"It's more of the fact that they are acquiring assets from yu and the transaction has made progress and is now confirmed," Ian Gachichio, research analyst at Kestrel Capital, said.

"It's a positive thing because they are receiving additional frequency spectrum which they need to launch 4G and also improve their quality of service."

On the secondary market, government bonds valued at 3.86 billion shillings ($43.57 million) were traded, up from 1.32 billion shillings on Monday. KES= KES1= ...........................Shilling spot rates KESF= 0#KESF= .....................Shilling forward rates EURKES= KESX= KESX1= .......................Cross rates KES=KE ..................................Local contributors CBKINDEX .......................Central Bank of Kenya Index KE/DEBT .....................Kenyan Bonds contributor pages CBK03 CBK06 KE3MTB= ...............Treasury bill yields CBK04 ..................Central bank open market operations CBK07 .........................Horizontal repo transactions KEIBR= , CBK02 ................Daily interbank lending rate 0#KETSYSTR= .............................Kenya Bond pricing ECONAFRICA ..................Real time Africa economic data ...........................African economic news .NSE20 .................................NSE-20 Share Index .NASI .................................NSE All Share Index .FTFNKEN1 ...........................FT NSE Kenya 15 Index .FTFNKEN2 .......................... FT NSE Kenya 25 Index SPEED GUIDES: REUTERS KES/1 KE/DEBT MONEY KE/EQUITY (1 US dollar = 88.6000 Kenyan shilling)

(Editing by James Macharia) ((george.obulutsa@thomsonreuters.com; Tel: +254 20 499 1232; Reuters Messaging: george.obulutsa.thomsonreuters.com@reuters.net))

Keywords: KENYA MARKETS/