S.Lanka stx at peak on stability hope, low T-bill yields

 * Market hits new record high; up 1.3 pct
 * Drop in T-bill yields, stability hopes push bourse up
 * Rupee down on share-related transaction

 COLOMBO, Sept 8 (Reuters) - Sri Lanka's benchmark share index hit a new record high again on Wednesday on lower interest rate expectations and hopes of economic and political stability after proposed constitutional changes.

 Sri Lanka's main share index .CSE jumped 1.32 percent or 77.68 points to hit a record of 5,962.62. It touched an intraday high of 5,974.73 points. The index is Asia's best performer in 2010 with a 76.1 percent gain.

 Yields in 182- and 364-day T-bills fell 52 and 45 basis points respectively on Tuesday. Analysts said  shrinking fixed-income returns and the expected passage of a constitutional amendment in parliament boosted the market.

 The market has gained over 6.5 percent since the cabinet backed an amendment that would free President Mahinda Rajapaksa to run for a third term after his present one expires in 2017.

 Market heavyweight and top conglomerate John Keells Holdings JKH.CM jumped 4.1 percent, while private lender Hatton National Bank HNB.CM gained 6.8 percent.

 Turnover was 4.8 billion rupees ($42.5 million), eight times the 2009 average. Foreign investors bought a net 416 million rupees' in shares, but they have sold a net 14 billion
rupees' worth this year.

 The rupee LKR= closed weaker at 112.72/75 a dollar from Tuesday's 112.63/67 due to dollar demand from an investor cashing out a stock market transaction, dealers said.

 FACTORS TO WATCH

•  Why foreign investors are selling despite post-war economic optimism
•  Whether there will be a drastic technical correction
•  Tax reforms promised by the government

source - www.reuters.com