Sri Lanka stocks hit four-month low on SEC selling rule
* Bourse down 2.1 pct; brokers sell shares after SEC rule
* Rupee depreciation boosts foreign share buying
* Rupee down on importer dollar demand-dealers
COLOMBO, May 23 (Reuters) - Sri Lanka's stock market fell to a four-month low on Wednesday after the market regulator prohibited employees of broker firms from selling shares for six months from the date of buying.
The main share index fell 2.1 percent, or 103.13 points, to 5,048.11, its lowest since Feb. 15.
Sri Lanka's Securities and Exchange Commission on Wednesday said it would prohibit employees and directors of all market intermediaries to sell shares within six months of buying, except in the case of initial public offerings.
"Brokers were dumping shares and some were not sure what this directive is," said a broker, who asked not to be identified.
Tushara Jayaratne, the SEC spokesman, said the new rule would take effect either on Thursday or Friday.
The SEC's decision comes after state-run National Savings Bank last week decided to default on a 400 million rupee ($3.08 million) deal on The Finance Company, which was bought at 49.75 rupees when it was trading at 30 rupees.
The island nation's treasury has started a probe into the deal while the Colombo stock market and SEC are also conducting investigation.
Analysts said the market was expected to dip further on the new SEC rule.
However, foreign investors continued to buy shares and brokers attributed the buying to a weaker rupee.
Foreign investors bought a net of 131.3 million rupees worth shares, extending the total net inflows into the stock market to 22.2 billion rupees ($171.16 million) so far this year.
Turnover was 817.8 million rupees, the highest since April 4, but below this year's daily average of 1.04 billion rupees.
The index is one of the worst performers among Asian markets, with a 16.90 percent loss so far this year.
The rupee edged down to 129.90/130.00 against the dollar from Tuesday's close of 129.75/85 on importer demand for dollars. ($1 = 129.7000 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Nick Macfie)
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