MOGADISHU (AFP) — Two hundred Somali VIPs on Friday feted the first year of President Sharif Sheikh Ahmed's shaky rule as fighting that killed at least nine overnight rocked a theatre where they were gathered.

As poetry was being read inside a newly-renovated theatre on Mogadishu's presidential compound, the Al Qaeda-inspired Shebab group pounded the area with mortar rounds and machinegunfire.

There were surreal scenes of Sharif and his prime minister Omar Abdirashid Sharmarke watching a video celebrating their first year in office as the smell of gunpowder filled the room after a night of deadly clashes.

Sharif was unshaken despite the sound of explosions, outgoing or incoming mortar rounds and artillery shells drowning the show.

A few metres away from the freshly whitewashed walls of the theatre a seriously wounded man was being evacuated in a carpet.

Artillery exchanges and automatic weapons fire broke out around 2:00 am (2300 GMT Thursday) between the African Union's peacekeeping mission (Amisom) and Islamist insurgents and ran through the night.

After dying down a little the violence resumed in full intensity at dawn, an AFP reporter on the scene said.

"Around seven civilians died in the clashes, including women and children. Most of them were killed by mortar shells and stray bullets," Abdi Adan, an eyewitness, told AFP.

The fighting was concentrated around the strategic K4 junction halfway between the Somali capital's airport and the port, on the edge of an area controlled by the African Union peacekeeping mission (Amisom).

The Shebab in a statement said two of its fighters died in the overnight clashes.

"Four civilians died in Wardhigley district and three others were killed in Holwadag and Bakara area. It was the worst fighting we have seen recently," Mohamoud Ahmed, another local resident, said.

"Kilometre Four" (K4) in southeastern Mogadishu is where the airport road meets several other key thoroughfares and is a major flashpoint in the war-ravaged coastal city.

Civilians living in the densely-populated neighbourhoods clamped between Amisom-protected areas and the strongholds of the Shebab Islamist insurgents are often caught in the crossfire.

"We have collected around 22 injured from several locations in Mogadishu and several people others have died," Ali Musa, head of Mogadishu's ambulance services, told AFP.

"I don't have the full figures but I know that three of the dead are a mother and her two children," he said.

The Shebab, whose leader late last year proclaimed his allegiance to Al Qaeda supremo Osama bin Laden, issued a statement claiming responsibility for the shelling.

"Our holy warriors launched a fierce offensive on several locations in Mogadishu where the apostate militias and their Christian backers were stationed," the Shebab statement said.

They were referring to government troops, who they accuse of being puppets of the West, and to Amisom's Ugandan and Burundian troops, who they routinely describe as crusaders bent on introducing Christianity to Muslim Somalia.

On January 30 last year, Somali MPs gathered in Djibouti to elect a new president and Sharif was declared the winner the next day and hailed by many in his country and abroad as Somalia's best chance of peace in years.

Officials had spent the week preparing for Friday's celebrations, which included dancing, singing and poetry reading.

The ceremony was attended by most of the embattled transitional federal government (TFG) as well as clan leaders.

Sharif, a moderate Islamist cleric, came to power a year ago pledging to bring Islamist rebels back into the fold but the Shebab and his former allies from the Hezb al-Islamm group instead turned against him.

The two insurgent movements in May last year launched a bruising military offensive aimed at toppling. The almost uninterrupted fighting has killed thousands and displaced tens of thousands.