S.Lanka shares flat on weak profit, interest rates

COLOMBO Aug 13 (Reuters) - Sri Lankan shares .CSE closed flat on Thursday, as early gains on retail buying were offset by losses in blue chips over poor earnings and high borrowing costs that have hampered new corporate investments.

The all-share index closed 0.08 percent or 1.95 points firmer at 2510.81, from its lowest close since July 24. It hit a more than 14-month high on Friday.

"Market is stagnant and waiting for interest rate cuts," Harsha Fernando, CEO at SC Securities, told Reuters. "Despite interest rates having declined, still they are high." Sri Lanka's benchmark 91-day Treasury bill yield has declined by 6.76 percent so far in 2009 and stood at 10.57 percent on Wednesday, the market lending rates are still around 15 percent.

Analysts say firms are waiting for lower rates to go for long-halted investments.

On Monday, Central Bank Governor Ajith Nivard Cabraal told Reuters the prime lending rate should ease to 12.5 percent by end-2009 compared to the current 14.5 percent. [ID:nCOL488027]

C.P.J. Siriwardena, the Superintendent of the central bank's Public Debt Department told Reuters on Thursday he expects T-bill yields to stabilise between 10-10.5 percent by 2009, but there would some volatility.

Top mobile phone operator Dialog Telekom DIAL.CM rose 4.35 percent to 6 rupees, on a weighted average, before it posted a net loss of 7.67 billion rupees for the June quarter. [ID:nCOL391087]

The company, in a statement to the bourse, said it had provided for a one-off impairment charge, amounting to 6.03 billion rupees in the June quarter to upgrade its network.

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, closed flat at 130 rupees.

Top listed private lender Commercial Bank of Ceylon COMB.CM, which on Wednesday reported a 2.7 percent rise in its June quarter, fell 0.53 percent to 142 rupees.

The bourse is up 67 percent so far this year and is one of Asia's best-performing markets.

It has surged 31.6 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 sixth of the overall turnover of 293.6 million rupees ($2.55 million). Last year's daily average volume was 464 million rupees.

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.

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.

Sri Lanka will issue a new five-year, $500 million sovereign dollar bond soon and is aiming for a yield of 7 percent, Sri Lanka's central bank said on Thursday. [ID:nCOL490013]

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 up to 9.223 percent from Wednesday's 9.191 percent.

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