Sri Lanka stocks steady at over 11-mth closing high; cbank keeps rates unchanged

COLOMBO Tue May 20, 2014 7:45am EDT

COLOMBO May 20 (Reuters) - Sri Lanka stocks ended steady on Tuesday, hovering above their highest close in more than 11 months after the central bank kept key rates at multi-year lows.

The gains were led by telecom stocks and stockbrokers expect further gains due to lower interest rates.

The main stock index ended up 0.04 percent, or 2.37 points, to 6,321.61, its highest close since June 10 last year.

Before the market opened, the central bank kept policy rates steady for the fourth straight month, as expected.

The exchange witnessed net foreign outflow for the first time in 20 sessions. Offshore investors were net sellers of 17.3 million rupees ($132,700) worth of shares on Tuesday, but they have been net buyers of 842.56 million so far this year.

Shares of top mobile phone operator Dialog Axiata ended up 1.03 percent at 9.80 rupees.

The market has been on a rising trend since mid-March as many investors were compelled to return to the stock market because low interest rates have made fixed-income assets less attractive, stockbrokers said.

The index has risen 1.53 percent in the last eight sessions.

However, analysts have raised concerns over sluggish economic growth because of lower credit growth and consumer spending.

Despite a multi-year low interest rate regime, data showed private sector credit grew 4.3 percent in March from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2 percent on the year.

On Monday, central bank Governor Ajith Nivard Cabraal said Sri Lanka's private sector credit growth would pick up to around 15 percent by the end of this year and continue to improve through 2016.

On Tuesday, the central bank said it expected to introduce a new guarantee scheme for gold loans to boost credit growth. ($1 = 130.3500 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

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