Sri Lanka shares at 3-mo high on retail buying

 * Bourse gains to highest level since Oct. 5.

 * Retailers move the market by buying illiquid shares

 * Rupee edges up on high importer dollar demand.

 COLOMBO, Jan 18 (Reuters) - Sri Lanka's bourse edged up on Tuesday to a more than three-month high on retail buying of illiquid shares, while the rupee edged down on heavy importer dollar demand.

 The island's main share index .CSE closed 0.72 percent or 50.27 points weaker at 7,058.33. It has been Asia's best performer with a 6.4 percent gain so far in 2011 after being the top performer last year with a 96 percent return.

 Analysts said retail buyers bought illiquid shares like Colombo Fort Land CFLB.CM, which jumped 27.5 percent, accounting for a significant part of the overall market's gain.

 Turnover was 3.5 billion rupees ($31.6 million), more than last year's daily average of 2.4 billion. Foreign investors were net buyers of a net 44.5 million rupees' worth shares on Tuesday, but they have sold a net 1.6 billion rupees so far this year after selling a net 26.4 billion rupees in 2010.

 The bourse is trading at a forward price-to-earnings (P/E) ratio of 17.7, highest among emerging markets, compared with 13.0 in Asian markets and 12.1 in global emerging markets, Thomson Reuters StarMine data showed. Its 14-day relative strength index is at 81.5, beyond the overbought limit of 65.4.

 The traded share volume was 190.5 million against five-day and 30-day average of 102.6 million and 65 million respectively. The 90-day average volume is 68.3 million. Last year's daily average volume was 69.2 million.

 Sri Lanka's rupee LKR= edged down to 110.85/88 a dollar from Monday's 110.78/80 on importer dollar demand, traders said.

 FACTORS TO WATCH:

• Corporate earnings for the December quarter
• Whether a technical correction will bring the bourse down
• If foreign funds buy shares in large volumes

source - in.reuters.com