Wednesday, May 9, 2012

Sri Lanka shares at three-month low; rupee edges up

* Stocks hit 12-wk low; down for 7th straight session

* Investors worried over suspected insider trade probe on TFC share deal- brokers

* Rupee edge up; dull trade seen dealers

COLOMBO, May 9 (Reuters) - Sri Lanka's stock market fell to a three-month low on Wednesday, a seventh straight decline, after the country's treasury department ordered an investigation of a share sale involving The Finance Company PLC, traders said.

A Sri Lanka Securities and Exchange Commission (SEC) official told Reuters that it is continuing its investigation on the share sale.

"We are continuing our investigations to find out about the conflict of interest," said an official at the SEC asking not to be named adding that "Finding out about insider trading is also part of the investigation."

The 400 million rupee ($3.1 million) deal in which state-owned National Savings Bank bought a 13 percent stake in The Finance Company at 49.75 rupees per share though it was traded at 30 rupees in the market was suspended by President Mahinda Rajapaksa, who is also the finance minister.

The deal went through the market on April 30 and settlement was due on May 3.

Shares in the Finance Company fell 2.37 percent to 28.80 rupees a share on Wednesday, while the main share index fell 0.73 percent, or 38.81 points, to 5,256.79, its lowest level since Feb. 16.

The stock market is down more than 13 percent this year.

The day's turnover was 544 million Sri Lanka rupees, well below this year's daily average of 1.2 billion rupees.

Despite the fall, the market saw a foreign inflow of 278.9 million rupees extending the net foreign inflow so far this year to 21.7 billion rupees.

The Sri Lankan rupee ended slightly firmer at 127.65-95 against the dollar from Tuesday's close of 127.80/128.00 as mild importer demand for the greenback was offset by exporter dollar sales.

The rupee gained 1.6 percent last week after the treasury secretary warned of resumed market intervention if the currency dropped beyond "tolerable" levels.

($1 = 128.0000 Sri Lanka rupees) (Reporting by Ranga Sirilal; Editing by Ed Lane)

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