UK's FTSE closes 4th straight quarter of gains near record highs

* FTSE 100 down 0.6 pct on day, up 2.8 percent in Q1

* Fourth straight quarter of gains

* South Africa-facing stocks fall after fin min sacked

* Old Mutual (Other OTC: ODMUF - news) , Investec (LSE: INVP.L - news) see biggest drop since Dec (Shanghai: 600875.SS - news) 2015 (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets)

By Kit Rees and Helen Reid

LONDON, March 31 (Reuters) - Britain's top share index fell on Friday but completed its fourth successive quarter of gains, the best such winning streak since 2011.

The blue-chip FTSE 100 rose 2.8 percent over the first three months of 2017, though incipient Brexit negotiations raised some doubts over whether above-average valuations could last.

On the day, it was down 0.6 percent, weighed down by South Africa-exposed stocks after President Jacob Zuma sacked finance minister Pravin Gordhan, causing a slump in the rand.

The FTSE's foreign-earning firms have benefited from a weaker pound since Britain's vote to leave the European Union in June 2016, pushing the index up to record highs, with the latest set earlier this month.

But the FTSE has underperformed European peers this quarter, partly due to the pound, which posted its first quarterly gains in six quarters.

Britain's more domestically exposed mid caps posted a 4.9 percent gain for the quarter, their third straight quarterly rise.

"It's been a fairly decent performance this quarter when you consider all the headwinds," said Michael Hewson, market analyst at CMC Markets (LSE: CMCX.L - news) .

"It looks mildly encouraging for the second quarter," he added, listing the main concerns for the coming months as French elections and uncertainty surrounding U.S. President Donald Trump's policies.

The start of Britain's long divorce process from the European Union spelled uncertainty ahead, though Hewson noted a further weakening of the pound in the event of hard-ball negotiating tactics could push British equities up to new highs.

The FTSE trades at 14.6 times forward earnings versus a 10-year average of 12 times, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data.

On the day, shares in South Africa-facing insurer Old Mutual slumped 7.5 percent, the top blue-chip faller, after Zuma dismissed the respected Gordhan, sending the rand and government bonds lower.

Both Old Mutual and asset manager Investec posted their worst losses since December 2015, when Zuma's sudden sacking of then-finance minister Nhlanhla Nene sent South African assets tumbling.

Mondi (Frankfurt: KYC.F - news) and Mediclinic, also exposed to South Africa, fell 2.5 and 6.2 percent.

"They're all exposed to the South African rand, and whenever you have turmoil down there, such as Zuma firing the finance minister, the rand ... weakens," said Mike van Dulken, head of research at Accendo Markets.

Miners also put pressure on the index, as Anglo American (LSE: AAL.L - news) , BHP Billiton (NYSE: BBL - news) and Rio Tinto (Hanover: CRA1.HA - news) fell between 2.3 percent and 3.1 percent, tracking metals prices lower.

There were more dramatic moves among British mid caps , which overall fell 0.1 percent, with Investec down 9.9 percent.

Shares (Berlin: DI6.BE - news) in life sciences and tech investor Allied Mind were down 4.9 percent, hit by a double downgrade from Jefferies which cut the stock to "underperform" from "buy", with analysts saying that writedowns of assets seem more likely than sudden value uplifts.

Challenger bank Shawbrook rose to its highest level in more than a year, up 9.8 percent after receiving a formal buyout offer for 842.4 million pounds ($1.05 billion) from private equity firms Pollen Street Capital and BC Partners.

Shawbrook has previously rejected the same proposal, then valued at 825 million pounds.

"We still think this represents a huge undervaluation, but given poor performance by management in defence so far, we would expect this to get done," Gary Greenwood, analyst at Shore Capital (Other OTC: CGHC - news) , said in a note. (Reporting by Kit Rees and Helen Reid; Editing by Mark Trevelyan)