Sri Lanka stocks rise to 2-month high on financials, foreign inflow

COLOMBO, April 9 Wed Apr 9, 2014 7:43am EDT

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COLOMBO, April 9 (Reuters) - The Sri Lankan share index rose to a near two-month closing high on Wednesday, led by financial shares such as Ceylinco Insurance Plc, while heavy foreign buying in the island nation's risky assets also boosted sentiment.

The main stock index closed 0.19 percent, or 11.39 points, firmer at 6,083.55, its highest close since Feb. 12.

Analysts expect the market to gain further due to prevailing lower interest rates.

Brokers say the $19.50 billion worth stock market is gradually attracting investors who are looking for higher returns as the deposit rates in banks and financial companies are not beyond 6-6.5 percent.

The day's turnover was 1.32 billion rupees, well above this year's daily average of 1 billion rupees.

The bourse saw net foreign inflows of 793.4 million rupees, though foreigners have net sold 8.5 rupees worth of shares so far this year.

Analysts, however, said foreign investor sentiment is yet to recover after the United Nations on March 27 announced it would probe alleged war crimes by the island nation.

The bourse has suffered 4.37 billion rupees in foreign outflows in the nine sessions since March 28 due to the exit of a large foreign fund.

Shares in Ceylinco Insurance gained 4.18 percent to 1,390.10 rupees, with 928 shares changing hands.

The United Nations has launched an inquiry into war crimes allegedly committed by both Sri Lankan state forces and Tamil rebels during a conflict that ended in 2009, saying the government had failed to investigate properly.

Analysts said the outcome of the resolution was expected, but investors' sentiment has been dented over concerns it could hurt the country's economy. Several potential buyers of risky assets are waiting for a clear direction. ($1 = 130.5950 Sri Lanka Rupees) (Reporting by Shihar Aneez; Editing by Anand Basu)

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