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COLOMBO, Aug 4 (Reuters) - Sri Lankan stocks hit a near three-year closing high on Monday, led by large cap shares, on expectation of strong corporate earnings and interest rates further falling, even as continued buying by foreign investors propelled a shift into risky assets.
The main stock index ended 0.18 percent, or 12.02 points, firmer at 6,822.15, its highest close since September 20, 2011. It rose 6.82 percent in July and is up 15.21 percent so far this year.
Hopes over strong corporate earnings, declining interest rates and continued buying by foreign investors have helped boost interest in risky assets in the $21.93 billion-worth stock market.
Turnover was 2.29 billion rupees ($17.59 million), more than double this year's daily average of about 1.09 billion rupees.
Foreign investors were net buyers of 32.8 million rupees worth of shares on Monday, extending the year to date net foreign inflow to 10.93 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.
Gains were led by large-cap share Ceylon Tobacco Company Plc which rose 1.64 percent to 1,149.10 rupees. Top conglomerate John Keells Holdings Plc rose 0.64 percent to 237 rupees.
The Ceylon Tobacco Company reported a 11 percent fall in its June quarterly earnings after market hours.
Trade Finance & Investments Plc which accounted for 67.4 percent of the day's turnover rose 2.94 percent to 28 rupees. The company, in a disclosure, said five of its shareholders sold 75.43 percent stake to Commercial Credit and Finance Plc at 28 rupees a share.
Shares in Commercial Credit and Finance rose 1.6 percent to 25.40 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 Biju Dwarakanath)