S.Lanka shares enter third week moving sideways

COLOMBO Aug 11 (Reuters) - Sri Lanka's share market .CSE on Monday entered a third week moving sideways, with caution prevailing due to low foreign buying, poor earnings and retail investors taking profits on blue chips.

The all-share index closed 0.27 percent or 6.76 points weaker at 2522.77, after reaching an over 14-month high of 2552.35 in early trade due to heavy retail trading. Later, the index fell on blue chip sales, analysts said.

"There was no positive news to boost the market. Earnings are not that great for the June quarter," said Harsha Fernando, CEO at SC Securities. "So investors stayed away with a wait-and-see approach."

The bourse is still up 68.2 percent so far this year, is one of Asia's best-performing markets.

It has surged 32.2 percent since the government declared victory in the war on May 18, but the rebound appears to have flattened and the overall recovery puts the bourse at levels last seen in mid-June 2008.

Foreign buying was less than a tenth of the overall turnover was 354.9 million rupees ($3.09 million). Last year's daily average volume was 464 million rupees.

Analysts say foreign buying will be the main factor that could boost the market further, after the end of the war and a $2.6 billion loan from International Monetary Fund (IMF) sparked local retail investor participation.

Poor earning and exchange rate worries have kept foreign buying low, traders said.

However, Central Bank Governor Ajith Nivard Cabraal on Wednesday told Reuters he was comfortable with the exchange rate and saw no reason to adjust it or stop prevening appreciation.

Cabraal said the central bank plans to maintain its monetary policy of cautiously easing interest rates throughout 2009. [ID:nCOL428071]

John Keells Holdings JKH.CM, which on July 30 posted a 22 percent drop in its net profit for the first quarter, fell 0.93 percent to 133.50 rupees, bourse data showed. [ID:nCOL428071]

The rupee LKR= ended flat at 114.90/95 a dollar as a state bank, which the central bank uses to direct the market, bought the dollar at 114.90 for the twelfth straight week.

The interbank lending rate or call money rate CLIBOR edged down to 9.255 percent from Friday's 9.299 percent.

For secondary market rates, please see <0#LKBMK=>. ($1=114.925 Sri Lankan Rupee) (Editing by Bryson Hull)