Sri Lanka bourse recoups early losses, ends firm

COLOMBO Tue Aug 12, 2014 7:35am EDT

COLOMBO Aug 12 (Reuters) - Sri Lankan stocks recovered on Tuesday to end a tad firmer around a three-year closing high, led by large caps such as Ceylon Tobacco Company Plc, as lower interest rates and buying by foreign funds helped investors bet on risky assets.

Stockbrokers, however, expect a correction during the week, in an overbought market, after the index gained for a sixth straight session.

The main stock index, which fell as much as 0.57 percent during the early trade, closed 0.07 percent, or 4.98 points firmer at 6,947.90, its highest close since Sept. 12, 2011. It has risen 17.51 percent so far this year.

"The market rebounded during the latter part of the day with gains in big cap illiquid shares," said a stockbroker requesting not to be named. "A correction is expected. But the market will break the 7,000 level."

Analysts said hopes of a policy rate cut on Friday and further fall in interest rates helped boost turnover, and that better corporate earnings and continued foreign buying too have helped maintain sentiment.

Turnover was 1.2 billion rupees ($9.22 million), more than this year's daily average of 1.11 billion rupees.

Foreign investors bought a net 164.5 million rupees worth of shares on Tuesday, extending the year-to-date net foreign inflow to 12.29 billion rupees.

Ceylon Tobacco Company Plc which led the overall index gain, added 4.15 percent to 1,197.70 rupees, while Ceylon Cold Stores Plc gained 3.92 percent to 220.20 rupees.

Profit taking dragged the market heavyweight John Keells Holdings Plc down 0.63 percent to 238 rupees, analysts said. (1 US dollar = 130.1800 Sri Lankan rupee) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)