By Sahra Abdi and Abdi Sheikh

MOGADISHU (Reuters) - Kenyan and Somali troops advanced on an Islamist-held town in southern Somalia on Thursday and African Union peacekeepers moved in on one of the last pockets under militant control in the capital Mogadishu.

After a series of kidnappings of foreigners in Kenya by gunmen thought to be linked to the al Qaeda-linked al Shabaab, Nairobi launched a cross-border incursion to flush out the rebels from its porous frontier area.

The troops, backed by Somali government forces, have found it difficult to make much progress through torrential rains and heavy, muddy soil.

On Wednesday, a Kenyan military spokesman said the army had secured three towns. Al Shabaab said they had seen Kenyan troops in the towns of Taabto, Qoqani and near the border town of Elwaq but denied that any face-to-face fighting had taken place.

"We have advanced. We are now close to Afmadow," Somali Colonel Yasin Adan told Reuters from an area near Afmadow.

"Our allied forces (Kenyan troops) are with us. We cannot wait for the soil to dry. We are moving slowly, slowly."

Al Shabaab's fighters have hunkered down in Afmadow, a stronghold which serves as a transit point for goods from the port in Kismayu, about 120 km south of Afmadow.

"Tension is high in Afmadow. Whenever we open our shops, people scare us and say, 'The Kenyan troops have come,'" said Afmadow resident Hawa Gadid.

"Al Shabaab have been forcibly picking teenagers from their houses in the last 48 hours (to fight). They are determined to fight the Kenyans come what may. Afmadow is al Shabaab's frontline," she told Reuters, adding truckloads of fighters were arriving from other regions.

A senior Somali commander said the operation's aim was to rid Kismayu, a port city that serves as al Shabaab's nerve center for operations, of the militants. Residents said planes were flying low over Kismayu.

Kenya has long looked nervously at its anarchic neighbor and its troops have made brief incursions in the past.

This week's operation is on a much larger scale which could invite major reprisals from al Shabaab but with the east African country's multi-million dollar tourism industry at stake as well as its reputation for a relatively stable investment haven, Nairobi felt it had no choice but to strike back.

MOGADISHU FIGHTING

Al Shabaab has vowed to retaliate, saying it was not responsible for a spate of kidnappings of foreigners in Kenya. It says Nairobi is using the attacks as a pretext for its military campaign, dubbed Operation Linda Nchi - Swahili for "Protect the Nation."

Paris said on Wednesday that Frenchwoman Marie Dedieu, whom gunmen seized from her home on the northern Kenya coast and took to Somalia in a speedboat, had died.

Another British woman and two Spanish female aid workers are still missing.

The Somali government denounced Dedieu's death and vowed to bring those responsible to justice. The government, however, with the support of African Union peacekeepers only controls most of the capital Mogadishu, while al Shabaab have a strong grip on large swathes of southern-central Somalia.

Under sustained pressure from government troops and African peacekeepers, al Shabaab withdrew from most of their bases in Mogadishu in August, but remained in a few pockets and have still managed to carry out suicide bombings in the capital.

On Thursday, African peacekeepers and Somali government forces captured one of the last remaining pockets under al Shabaab's control in Mogadishu.

"We have made a lot of progress this morning. We captured part of Dayniile district," Ndayiragije Come, a spokesman for the Burundian forces, said on Thursday.

"The operation is going on. Al Shabaab is also fighting."

Two bombings in Mogadishu this week, as well as a suicide truck bombing earlier this month which killed more than 70 people, have raised concerns at the government's failure to secure the entire coastal capital after al Shabaab's withdrawal.

(Writing by Yara Bayoumy)