Friday 3 January 2014

Sri Lanka stocks edge up to more than 11-week closing high

COLOMBO, Jan 3 (Reuters) - The Sri Lankan bourse gained for a sixth straight session to close at its highest level in more than 11 weeks on Friday, a day after the central bank cut its lending rate by 50 basis point to a multi-year low. 

The main stock index touched 6,007.79 during the session, a level last seen on Aug. 23 last year, but retreated to end up 0.1 percent, or 5.76 points, at 5,973.80, its highest close since Oct. 17. It gained 1.65 percent on the week. 

"Investors are optimistic over the rate cut and believe retail and large institutional investors will return to the market once banks reduce their lending rates in line with the rate cut," a stockbroker said on condition of anonymity. 

The central bank slashed the standing lending facility rate or reverse repurchase rate by 50 basis points to a multi-year low of 8.00 percent on Thursday, in a move to reduce commercial banks' interest rate spreads. 

Revealing its financial and monetary policies for 2014, the central bank governor said the economy is expected to grow 7.8 percent this year, with an inflation target of 4-6 percent in a lower interest rate regime. 

The index is in an overbought region for a second session with its 14-day relative strength index at 75.785, above the upper neutral level of 70, Thomson Reuters data showed. The index gained 4.8 percent in 2013 after losses in the previous two years, giving a return of 2.18 percent in dollar terms. 

Many investors locked their funds in risk-free debentures instead of risky assets due to a sluggish bourse amid falling interest rates. Foreign investors bought 7.8 million rupees worth of shares on Friday after buying a net 22.88 billion rupees worth of stocks last year, compared with a record 38.68 billion rupee net foreign inflow in 2011. 

The day's turnover was 349.6 million rupees ($2.67 million), less than last year's daily average of about 828.4 million rupees. 

($1 = 130.7250 Sri Lanka rupees) 

(Reporting by Shihar Aneez; Editing by Sunil Nair and Robert Birsel)
Source: http://in.reuters.com