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Wednesday, October 6, 2010

Sri Lanka shares down on correction; T-bill yields up

* Bourse down 1.8 pct; loses 4 pct in last three sessions

* Correction brings market to neutral region from overbought

* Rupee at new 21-mo high; T-bill yields reverse trend

COLOMBO, Oct 6 (Reuters) - Sri Lanka's benchmark share index fell for a third straight session on Wednesday with a 1.8 percent fall as investors booked profits mainly in top blue chips after a recent upward surge, analysts said.

Sri Lanka's main share index .CSE closed 1.84 percent or 128.67 percent weaker at 6,862.67. It is Asia's best performer in 2010 with a 102.7 percent gain. The index had risen 26.3 percent since Sept. 1 through Friday.

The bourse was driven down by blue chips led by 2.4 percent fall in market heavyweight John Keells Holdings JKH.CM and 4.4 percent drop in top fixed-line phone operator Sri Lanka Telecom SLTL.CM.

The fall of 4 percent in the last three sessions has almost brought down the index to the neutral region from an overbought zone with the 14-day relative strength index (RSI) at 70.3, just above the upper neutral limit of 70, Thomson Reuters data showed. The index was at 92.4 on Friday.

It is trading at the highest forward price-to-earnings ratio in Asia and global emerging markets at 22.1 times,
compared with 13.2 for all Asia and 12.1 for global emerging markets, Thomson Reuters StarMine data showed.

Market turnover was 2.7 billion rupees ($24.5 million), more than four times the 2009 average. Foreign investors sold a net 300.4 million rupees in shares and they have overall sold 17.1 billion rupees' worth this year.

The rupee LKR= edged down to 111.72/75 from Tuesday's 21-month high close due to importer demand for dollars, though the central bank reduced the dollar trading band by 10 cents to 111.60/112.00, currency dealers said.

Yields in T-bills reversed their downward trend, which analysts attributed to high inflationary expectations.
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FACTORS TO WATCH

Extent of the technical correction
The impact of higher inflationary expectations
Tax reforms promised by the government and how it proceeds with fiscal reforms agreed with the IMF

source - www.reuters.com