Sri Lanka Stock Picks

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Tuesday, February 1, 2011

Sri Lanka bourse gains on mid-cap share interest

* Bourse up on retail interest in mid-cap stx

* Foreign inflows come for first time in 9 sessions

* Rupee firms after cenbank reduces trading band

COLOMBO, Feb 1 (Reuters) - Sri Lanka's stock market edged up on Tuesday after three straight losses as retail investors bought mid-cap and penny stocks and foreign investors began buying after selling for the past eight sessions.

Foreign investors bought a net 21.8 million rupees' worth shares on Tuesday. They have sold a net 2.9 billion rupees so far in 2011, after selling a record net 26.4 billion in 2010.

The island's main share index .CSE closed 0.22 percent or 15.90 points firmer at 7,190.77. It hit a record closing high of 7,261.37 on Jan. 24 after touching a new intraday peak of 7,320.22 points.

Traded share volume was 96.3 million, against a five-day average of 114.9 million. The 30-day and 90-day average trading volumes were 87.1 million and 71.9 million respectively. Last year's daily average volume was 69.2 million.

The bourse has been Asia's best performer with an 8.36 percent gain in 2011 after being the top performer last year with a 96 percent return. Recent retail buying has pushed it deeper into the overbought region with the 14-day relative strength index at 72.6.

The bourse is trading at a forward price-to-earnings (P/E) ratio of 17.3, one of the highest among emerging markets, compared with 12.9 in Asian markets and 11.9 in global emerging markets, Thomson Reuters StarMine data showed.

Turnover was 3.2 billion rupees ($28.8 million), more than last year's daily average of 2.4 billion.

On Tuesday, the benchmark 91-day T-bill yield fell to 7.00 percent at a weekly auction, its lowest level in more than six years. [ID:nSGE71003P]

The rupee LKR= gained ending its four straight falls to close at 111.08/10 a dollar from Monday's 111.18/111.22 as the central bank reduced its dollar trading band by 10 cents to 110.50/111.10 from 110.60/111.20, dealers said.

FACTORS TO WATCH:

- If the reduction in T-bill yields pushes more investors toward the bourse

- If December quarterly earnings boost the bourse

- If foreign funds buy shares in large volumes

source - in.reuters.com