Sri Lanka stocks steady at over 33-month high

COLOMBO, July 18 Fri Jul 18, 2014 7:27am EDT

COLOMBO, July 18 (Reuters) - Sri Lankan stocks ended flat on Friday, hovering near a 33-month high struck on Wednesday as profit-taking in diversified shares was offset by gains in telecommunication shares, brokers said.

The island nation's share index has risen 5.39 percent so far this month as the yields in risk free treasury bills and the central bank's key monetary policy rates have fallen to multi-year lows amid continued foreign buying.

The main stock index edged up 0.33 points, to 6,722.2, near its highest close since Oct. 3, 2011 hit on Wednesday.

"Investors are positive as the interest rates have come down and the consumer demand is rising, which can have an impact on the banking sector," said Dimantha Mathew, manager research at First Capital Equities in Colombo.

The central bank on Monday kept policy rates steady at multi-year lows for a sixth straight month, as expected, despite private sector credit growth slowing to a 4-1/2-year low.

The index is in the overbought region since July 3. It has risen 13.69 percent so far this year, Thomson Reuters data showed.

Turnover was 1.3 billion rupees ($9.98 million), slightly above this year's daily average of about 1.09 billion rupees.

Foreign investors were net buyers of 62.4 million rupees worth of shares on Friday, extending net foreign inflows in stocks to 10.02 billion rupees so far this year.

Shares in Sri Lanka Telecom Plc rose 0.91 percent to 55.50 rupees, while large cap share Ceylon Tobacco Co Plc rose 0.86 percent to 1,112 rupees.

Hemas Holdings, a diversified conglomerate, fell 1.64 percent to 48.1 rupees.

Lower interest rates have prompted local investors to buy shares and shift their savings from unattractive fixed assets, analysts said, as yields on treasury bills edged down further at a weekly auction on Wednesday.

Analysts said foreigners have been buying risky assets because they see value in them, while falling yields in fixed assets gradually prompt local investors to shift to equities.

The market has been on a rising trend since late February due to continued foreign buying and lower interest rates. ($1 = 130.2000 Sri Lankan Rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)