S.Lanka shares at 2-wk low on profit, foreign woes

COLOMBO Aug 12 (Reuters) - Sri Lankan shares .CSE fell to a more than two-week closing low on Wednesday, with poor earnings by blue chips and a lack of post-war foreign participation keeping the market stagnant.

The all-share index closed 0.64 percent or 16.06 points weaker at 2508.06, its lowest close since July 24. It hit a more than 14-month high on Friday.

"The top three blue chips brought down the market," Mohandas Thangarajah, a broker at First Guardian Equities, told Reuters.

The market heavyweight and top conglomerate John Keells Holdings JKH.CM, which on July 30 reported a 22 percent drop in its June quarter net profit, fell 2.07 percent to 130 rupees, calculated on a weighted average.

The leading fixed-line phone operator, Sri Lanka Telecom SLTL.CM, which on Tuesday posted a 75 percent fall in last quarter net profit, closed 3.47 percent down at 41.75 rupees.

Top mobile phone operator Dialog Telekom DIAL.CM fell 4.17 percent to 5.75 rupees. The company is expected to release its quarterly earnings on Friday.

Analysts forecast poor performance from the company. The subsidiary of Malasia's Axiata (AXIA.KL) on Wednesday announced plans to spend at least $5 million expanding services in the former war zone in northern Sri Lanka.

The bourse is up around 66.9 percent so far this year and is one of Asia's best-performing markets.

It has surged 31.5 percent since the government declared victory in the war on May 18, but the rebound appears to have settled and the overall recovery puts the bourse at levels last seen in mid-June 2008.

Foreign buying was less than a seventh of the overall turnover of 270.1 million rupees ($2.35 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 war and a $2.6 billion loan from International Monetary Fund (IMF) sparked local retail investor participation.

Analysts say foreign investors were waiting for post-war growth performance in listed companies and the overall economy.

Central bank data shows post-war foreign investments in government securities has reached $270 million up to Monday, compared to a net inflow of less than $1 million in the bourse.

The benchmark 91-day Treasury bill yield fell 2 basis points at a weekly auction on Wednesday, but yields in 182-day and 364-day T-bills rose marginally. [ID:nCOL348050]

Currency dealers said interest rates are now bottoming out and expect a slight upward trend in coming weeks, if Sri Lanka fails to secure significant foreign borrowing soon.

Sri Lanka is planning to issue $500 million of five-year sovereign dollar bonds, aiming for a coupon rate of around 7 percent, sources close to the deal told Reuters on Tuesday. [ID:nCOL60119]

Sri Lanka on Tuesday accepted $190 million worth of bids for two-year Sri Lanka development bonds with a yield of six-month LIBOR plus 449.8 basis points, a central bank official said.

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.

Central Bank Governor Ajith Nivard Cabraal on Monday said he was comfortable with the exchange rate and saw no reason to adjust it or stop preventing appreciation. [ID:nCOL428071]

The interbank lending rate or call money rate CLIBOR edged down to 9.191 percent from Tuesday's 9.211 percent.

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