By Sylvia Westall and Ahmed Hagagy

KUWAIT (Reuters) - The opposition in Kuwait will press ahead with a march on Sunday to protest at new voting rules ahead of parliamentary elections, despite a government warning that it will not tolerate unsanctioned demonstrations, an activist said.

The OPEC member and U.S. ally said on Saturday it had not authorized any protests and the prime minister warned that police could use force if the authorities felt the Gulf Arab state was under serious threat.

Kuwait has avoided the sort of mass pro-democracy unrest that has toppled entrenched rulers in four other Arab countries since early last year, but tension between its elected parliament and government has mounted.

Hundreds of police lined the route in central Kuwait City a few hours before the planned march, raising fears of a repeat of clashes last month between police and thousands of demonstrators that ended with at least 30 people hospitalized.

The Information Ministry had cleared its car park on the command of the National Guard, news service al-Rai said in an SMS alert, while a major shopping mall and meeting point along the march route was closing early.

The stock index fell to its lowest level since July 2004 on Sunday, according to Reuters data.

"We will continue. The opposition no longer cares about government statements," an activist said, declining to be named.

"Our duty is to maintain internal security and public order and to deter lawlessness in all of its forms," Interior Minister Sheikh Ahmad al-Hamoud al-Sabah said on state news agency KUNA.

Kuwait has one of the most open political systems in the Gulf, including a parliament with legislative powers. But the 83-year-old ruler, Sheikh Sabah al-Ahmad al-Sabah, has the final say in state affairs and picks the prime minister, who in turn selects a cabinet.

Opposition politicians, youth groups and their followers have taken part in recent demonstrations protesting against changes to an electoral law announced last month by the emir.

Some opposition politicians say the changes are an attempt to give pro-government candidates an advantage in elections set for December 1, and have said they will boycott the vote.

"A COUP AGAINST THE CONSTITUTION"

The opposition has called the changes - which allow voters to choose only one candidate per electoral district - "a coup against the constitution", saying the reform would prevent its candidates from taking the majority they won in the last vote.

Forging an electoral alliance, which depends on supporters of one candidate voting for another in exchange for reciprocal support, would become unfeasible under the new system, they say. Political parties are banned in Kuwait, so lawmakers rely on being able to form blocs based on policy and family ties.

The government says the amendments were needed to preserve national unity.

Security forces used tear gas, stun grenades and baton charges at protests last month, witnesses said.

Demonstrations about local issues occur frequently in Kuwait, which tolerates more public dissent than Gulf neighbors. Violence had previously been very rare.

"Unauthorized demonstrations and protest marches do not count as legitimate means of reform and change," KUNA quoted a statement from the Ministry of Islamic Affairs as saying. It said such protests violated Islamic law.

An opposition bloc, made up of Islamist, liberal and tribal lawmakers, won a majority at the last elections in February. But that parliament was effectively dissolved by a court ruling in June that reinstated a more government-friendly assembly.

(Editing by Mark Heinrich)