Sri Lankan stocks slips from near 3-yr high on profit-taking, foreign outflow

COLOMBO Fri Aug 1, 2014 8:16am EDT

COLOMBO Aug 1 (Reuters) - Sri Lankan stocks ended a tad weaker on Friday, snapping a four-day winning streak as investors booked profits in large-cap shares as foreigners exited risky assets ahead of a key U.S. jobs report.

The main stock index ended 0.06 percent, or 3.77 points, weaker at 6,810.13, slipping from its highest close since Sept. 20, 2011 hit on Thursday. It rose 6.82 percent in July. The bourse is up 15.18 percent so far this year.

Expectation of strong corporate earnings, declining interest rates and continued foreign buying have helped boost buying risky assets in the island nation's $21.93 billion-worth stock market.

"Bit of profit-taking and the global worries dragged down the market," a stockbroker said on condition of anonymity.

Global shares fell on Friday and the euro eased against the dollar, hit by weak euro zone manufacturing data and nerves ahead of a key U.S. jobs report.

Analysts said the market will wait and see how foreign investors will react to the global situation and that earnings hopes could still drive the market with lower interest rates.

Foreign investors were net sellers for the first time in eight sessions. They have sold 77.9 million rupees ($598,300) worth of shares on Friday, but have been net buyers of 10.89 billion rupees so far this year.

Turnover was 775 million rupees, less than this year's daily average of about 1.09 billion rupees.

The index has been in the overbought region since July 3, as local investors moved funds from fixed income to riskier assets because of low interest rates and foreign buying.

Losses were led by large-cap share Ceylon Tobacco Company Plc which fell 1.54 percent to 1,130.60 rupees while Lion Brewery (Ceylon) Plc fell 2.33 percent to 625 rupees.

Lower interest rates have prompted local investors to buy shares and move away from unattractive fixed assets, analysts said. Yields on treasury bills edged down further by 7-10 basis points at a weekly auction on Wednesday.

The International Monetary Fund urged Sri Lanka on Wednesday to keep key interest rates on hold for the near term and said a cautious approach is warranted. ($1 = 130.2000 Sri Lankan Rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)