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Wednesday, February 2, 2011

Sri Lanka stx at record on earning hopes; rupee up

* Bourse hits record high close; heavy retail buying

* Foreign sales on net basis; bourse deeply overbought

* Cenbank reduces dlr trading band, despite demand-dealers

COLOMBO, Feb 2 (Reuters) - Sri Lanka's bourse hit a new record closing high on Wednesday in heavy retail buying, while the rupee closed firmer after the central bank reduced the dollar trading band despite demand for the greenback. The island's main share index .CSE closed 1 percent or 71.49 points firmer at a new all-time closing high of 7,262.26. It hit a record intraday peak of 7,320.22 points on Jan. 24.

Foreign investors sold a net 23.3 million rupees' worth shares on Wednesday and they have sold a net 2.9 billion rupees so far in 2011, after selling a record net 26.4 billion in 2010.

Traded share volume was 111.2 million, against a five-day average of 102.9 million. The 30-day and 90-day average trading volumes were 88.3 million and 71.8 million respectively. Last year's daily average volume was 69.2 million.

The bourse has been Asia's best performer with a 9.44 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 76.3.

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 11.8 in global emerging markets, Thomson Reuters StarMine data showed.

Turnover was 4.1 billion rupees ($37.3 million), more than last year's daily average of 2.4 billion.

The rupee LKR= closed firmer at 110.92/92 a dollar from Tuesday's 111.08/10 as the central bank, for the second straight day, reduced its dollar trading band by 10 cents to 110.40/111.00 despite heavy importer demand. Dealers said it appeared to be a strategy to curb inflation through currency appreciation.

FACTORS TO WATCH:

- The extend of the rupee appreciation the central bank will allow to curb inflation from expensive imports.

- If December quarterly earnings boost the bourse

- If foreign funds buy shares in large volumes

source - in.reuters.com