Sri Lanka stocks close at over 13-month high; foreign selling weighs

COLOMBO, July 4 Fri Jul 4, 2014 8:14am EDT

COLOMBO, July 4 (Reuters) - Sri Lankan stocks hit their highest closing level in more than 13 months on Friday, led by market heavyweight John Keells Holdings PLC despite foreigners selling risky assets.

Foreign investors were net sellers for the first time in nine sessions, offloading 104.7 million rupees ($804,000) worth of shares on Friday, but are net buyers of 9.09 billion rupees so far this year.

The main stock index ended 0.16 percent, or 10.23 points, firmer at 6,477.51, its highest close since May 23, 2013.

Analysts said local investors were active, while the independence day holiday in the United States dented foreign participation in the market.

"We have seen local investors who were on the sidelines coming back. It's a good signal for the market," said a stockbroker asking not to be named.

Turnover was 1.38 billion rupees ($10.60 million), more than this year's daily average of around 1.05 billion rupees.

John Keells shares rose 0.94 percent to 225 rupees, while Sri Lanka Telecom PLC rose 1.85 percent to 49.60 rupees.

Brokers said investors are bullish about the market after they witnessed large state funds actively traded shares on Wednesday.

Analysts said foreigners have been buying risky assets because they see values in them, while falling yield in fixed assets is gradually prompting local investors to shift their funds to equities.

They say foreign buying could continue due to lower inflation after government data showed annual inflation eased to 2.8 percent in June, its lowest since February 2012, down from 3.2 percent a month earlier.

Yields on treasury bills edged down further at a weekly auction on Wednesday.

However, analysts said investors are concerned over the recent ethnic violence and possible implications of a government spokesman saying Sri Lanka bought Iranian crude via third parties.

The market has been on a rising trend since late February due to continued foreign buying and lower interest rates. ($1 = 130.2200 Sri Lankan Rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)