By Richard Lough

NAIROBI, Sept 1 (Reuters) - Kenya voted peacefully in favour
of a new constitution to redraw the political landscape, but the
transition may be bumpy as the new basic law is brought into
effect.

The revised charter, which aims to address ethnically
divisive issues that have plagued Kenya's post-colonial history,
such as patronage, corruption and land grabbing, secures
President Mwai Kibaki his legacy.

However, eyes will now turn to the 2012 presidential
election, with political leaders already looking to draw maximum
political advantage from the referendum and jockey for position.

The stock exchange's benchmark 20 Share Index <.NSE20, hit
an almost 2-year high after the yes vote, seen as crucial for
stability, but has since eased off as investors cash profits.

There are fears that impending International Criminal Court
arrest warrants for masterminds of Kenya's 2007/2008
post-election bloodshed could provoke more violence.

Following are some of the main risk factors to watch:

NEW POLITICAL MAP

Kenya's new constitution is expected to bring more political
stability by removing the winner-takes-all system of the past.

There are greater checks on presidential powers while the
creation of a new county level of local government, set to enjoy
some autonomy and a share of the national budget, is aimed at a
more equitable development of rural Kenya.

What to watch

-- Implementation of the new constitution. Parliament has 90
days from the Aug. 27 signing of the constitution to set up a
Commission for the Implementation of the Constitution to oversee
the preparation of more than 40 bills that must be brought into
force by legislators.

Prime Minister Raila Odinga's Orange Democratic Movement
(ODM) party has blocked senior politicians who spearheaded the
"no" campaign from sitting on the commission to try to ease the
passage of bills through parliament.

-- More commissions will be formed to deal with political
hot potatoes, such as land ownership, where horse-trading is
likely ahead of the final passing of the relevant bills.

-- Political manoeuvrings as leaders eye 2012. An opinion
poll after the Aug. 4 poll named Odinga as the man to beat in
the next presidential ballot. But he will likely need to build
new alliances to remain as the 2012 frontrunner.

A thawing of relations between Odinga, from the Luo ethnic
community and Finance Minister Uhuru Kenyatta, from Kibaki's
Kikuyu tribe, has fuelled speculation of a new partnership.

Odinga needs to woo the Kikuyu, a major voting block, if he
is to have a real chance of winning the presidency. His one time
ally turned rival, William Ruto, is also likely to stand, taking
with him a large chunk of the Rift Valley vote that backed the
prime minister in 2007.

-- Odinga's health. Odinga continues to recover from surgery
to relieve pressure on his brain in early July. Doctors advised
extended rest and Odinga headed to Italy for a week before
Kibaki signed the new constitution.

ECONOMIC RECOVERY

East Africa's largest economy is forecast to expand by 4.5
percent this year, driven by a strong recovery in the
agriculture sector helped by heavy rains and resurgent tourism.

The Bank of Kenya wants commercial banks to lower lending
rates to stimulate credit growth and accelerate growth, though
they are unlikely to do so until 2011 as expensive deposits
mature and new lending opportunities emerge.

What to watch:

-- Second quarter results for 2010. The $35 billion economy
grew by 4.4 percent year-on-year in the first quarter and a
similar figure is forecast for the April-June period.

-- A sustained upwards shift in the yield curve on
government paper. The cut-off rate on Kenya's 91-day Treasury
bill rose to 2.202 percent at auction on Aug. 26 from 1.699
percent a month earlier.

At the longer end of the curve, Kenya sold a nine-year
amortised infrastructure bond with a cut-off rate of 7.293
percent, higher than the indicated coupon of 6.0 percent.

-- An uptick in inflation. Analysts reckon year-on-year
inflation bottomed out at 3.5 percent in June and it is expected
to accelerate to 4.3 percent by December 2010 and 6.3 percent in
2011.

Inflationary pressures are likely to come from food and fuel
costs. Rising inflation could end the central bank's cycle of
monetary easing.

-- The performance of the Kenyan shilling. The shilling has
been unable to sustain a referendum rally that saw it hit a high
of 79.10 per dollar on Aug. 9. It has eased off largely due to
dollar strength on global markets. However, traders say there is
decent risk appetite for the shilling.

ICC ARREST WARRANTS

The court's chief prosecutor Luis Moreno-Ocampo says he is
on track to issue arrest warrants by the end of the year for up
to six Kenyans from both sides of the election violence that
killed 1,300 people in late 2007, early 2008.

Critics of the ICC's investigations denounce the court as a
destabilising force as Kenya heads towards the 2012 poll. Its
supporters argue the fight against an entrenched culture of
impunity must not be compromised.

What to watch:

-- Kenya's cooperation with the ICC. The government has
previously promised to cooperate fully with Ocampo when he
issues arrest warrants for up to half a dozen Kenyans.

But Kenya's refusal last week to arrest Sudanese President
Omar Hassan al-Bashir, who faces ICC charges of genocide, has
been interpreted by some political analysts as a thinly veiled
statement of intent.

Bashir's brief visit to Nairobi has drawn fault lines in the
coalition and provoked widespread criticism.

-- Ocampo issues warrants for senior government ministers.
If top government officials prove to be on Ocampo's hit-list,
the arrest warrants might intensify infighting within the
coalition, unsettling investors.

-- Possible violent repercussions if any ethnic community
feels its leaders have been signalled out.