Pakistan - Pakistani forces backed by helicopter gunships and artillery recaptured a strategic town from Taliban militants after fierce fighting, officials said on Saturday.

Kotkai town in South Waziristan has changed hands three times since the army launched a major offensive on Taliban strongholds a week ago, highlighting the difficulty of seizing territorial advantage in the rugged mountains and valleys near Afghanistan.

It is also the birthplace of Pakistani Taliban chief Hakimullah Mehsud and the home town of Qari Hussain Mehsud, a senior commander known as the mentor of suicide bombers.

The offensive is a test of the government's determination to tackle Islamist fundamentalists, and the campaign is being closely followed by the United States and other powers embroiled in Afghanistan's growing conflict.

The militants have responded by stepping up a campaign of suicide bomb attacks and commando raids that have killed more than 150 people and wounded even more in the past three weeks.

Military spokesman Major-General Athar Abbas said security forces entered Kotkai on Friday evening and were now clearing the area. Government troops first took the town on Monday, but the Taliban retook control a day later.

The place was a stronghold of terrorists, with a majority of households turned into bunkers, he told a news conference, adding that militants were abandoning their weapons and shaving their beards to try to blend in with ordinary civilians and avoid capture.

Abbas said the military was ahead of schedule on the offensive but the terrain meant operations were going to slow down.

Tens of thousands of people have fled their homes in South Waziristan but aid officials do not expect the exodus to become a humanitarian crisis, as did a similar offensive in the Swat Valley earlier this year.

The rise in urban attacks by militants is taking a toll, however, with the country's stock market -- which has performed well this year after a slump in line with global markets -- dropping 6 percent in a week.

Analysts have warned of the possibility of more attacks as the militants come under pressure in South Waziristan, with the Taliban hoping bloodshed and disruption will cause the government and ordinary people to lose their appetite for the offensive.

A suicide bomber killed eight people outside a key airforce facility on Friday. Hours later, a car bomb outside a restaurant in the northwestern city of Peshawar wounded 15 people.
Remote and rugged South Waziristan, with its rocky mountains and patchy forests cut through by dry creeks and ravines, has become a global hub for militants who flit between Pakistan and Afghanistan.

A missile believed fired from a U.S. predator drone aircraft on Saturday killed at least 15 militants at a senior Taliban commander's hideout in the neighboring tribal area of Bajaur, a government official said.

All of them are militants, including foreigners, a senior government official, who declined to be identified, told Reuters.

He said the commander, Maulvi Faqir, narrowly escaped, but two of his relatives were killed.

About 28,000 soldiers are battling an estimated 10,000 hardcore Taliban, including about 1,000 tough Uzbek fighters and some Arab al Qaeda members.

In the last 24 hours, Abbas said 21 militants and three soldiers had been killed in Waziristan.

Foreign journalists are not allowed anywhere near the battle zone and it is dangerous even for Pakistani reporters to visit, so independent confirmation of casualty figures is difficult to obtain.

(Additional reporting by Sahibzada Bahauddin, Mian Saeed-ur-Rehman and Alamgir Bitani; Writing by Kamran Haider; Editing by David Fox)