* Market up 1.65 percent, extends gain for fourth day
* Investors banking on stability after new constitution
* Rupee down on importer dlr demand
COLOMBO, Sept 3 (Reuters) - Sri Lanka's benchmark share index hit a new high on Friday for the third straight day on hopes that proposed constitutional changes would boost political stability and energise the economy, analysts said.
Sri Lanka's main share index .CSE closed 1.65 percent or 95.32 points firmer at a new peak of 5,880.49, after hitting a new intraday high of 5,888.30 points. The index is Asia's best performer in 2010 with a 73.7 percent gain.
The market has gained 5 percent since the cabinet of ministers backed constitutional amendments that would free President Mahinda Rajapaksa to run for a third term after his present one expires in 2017. [ID:nSGE67T0AC]
Analysts said the amendments could bring to Sri Lanka the consistent economic policies it has been lacking during the course of a 25-year civil war that ended last year.
Top fixed-line phone operator Sri Lanka Telecom SLTL.CM jumped 8 percent to 48.60 rupees, while market heavyweight and top conglomerate John Keells Holdings JKH.CM rose 0.64 percent to 268.50 rupees.
Turnover was at 4.1 billion rupees ($36.4 million), seven times the 2009 daily average. Foreign investors bought a net 67.9 million rupees' in shares, but have overall sold a net 11.7 billion rupees this year.
The rupee LKR= closed weaker at 112.72/75 a dollar from Thursday's 112.57/60 on importer dollar demand, dealers said.
FACTORS TO WATCH:
- A technical correction as many traders say the market has become overheated
- Reasons why foreign investors are not buying shares
- Tax reforms promised by the government
source - www.reuters.com
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