COLOMBO, Dec 18 (Reuters) - Sri Lanka's rupee edged down on Thursday in thin volumes of trade as most corporate traders were on holiday ahead of festive season, dealers said.
Shares ended flat, but analysts said worries on economic and earnings outlook remained, with most investors staying away.
The rupee ended at 111.85/95 per dollar, weaker than Wednesday's close of 111.80/85.
Traders said inflows from worker remittances have kept the rupee stable in the last two sessions in the absence of central bank intervention after it hit a 14-month low on Tuesday.
It touched 112.00 on Tuesday, when the central bank allowed gradual depreciation of the rupee for a fifth straight day. It had fallen around 1.7 percent in the five days up until Tuesday.
On Wednesday, dealers and traders said the market was concerned about a pending oil hedging deal that could leave the foreign exchange market with low dollar liquidity as five banks involved would not be paid on time due to a court ruling.
The court has suspended hedging payments to the banks after several parties sued over the deal, which could cost the government hundreds of millions of dollars since it bet on oil prices rising to $200 a barrel.
They since have fallen nearly 70 percent from a peak of $147.
The Colombo All-Share indexbarely changed, edging up 0.05 percent or 0.75 points to 1,526.27. On Tuesday, the bourse hit its lowest close since Jan. 4, 2005.
The bourse is still down around 40 percent so far this year due to poor corporate earnings, high borrowing costs and global woes.
"The sentiment is still negative and the turnover is mainly because some investors are quitting the market by selling their stakes," said Mohandas Thangarajah, a stockbroker at First Guardian Equities.
Analysts said they hardly saw any impact because of a sovereign rating downgrade by Standard & Poor's Ratings Services (S&P).
S&P on Monday lowered Sri Lanka's sovereign rating from B-plus to B, five notches below investment grade on declining foreign currency reserves and a high fiscal deficit, but central bank disputed the rating agency's claim as 'factually incorrect.' See [ID:nCOL55007].
Sri Lanka's top fixed-line phone operator Sri Lanka Telecomrose 0.81 percent to 31.25 rupees, calculated on a weighted average, while top private lender Commercial Bank of Ceylon closed 0.74 percent firmer at 68.50 rupees.
Shares in Hatton National Bankrose 3.42 percent at 68 rupees in thin trade.
Top conglomerate John Keells Holdingsfell 3.51 percent to over 4-½ year closing low of 55 rupees, while tyre manufacturer Kelani Tyres , which accounted for 55 percent of the day's turnover, shed 1.06 percent to 23.25 rupees.
The market turnover of 81.4 million rupees ($0.73 million), around a fifth of last year's daily average of 400 million rupees. It hit a seven-year low of 13.1 million rupees on Dec. 4. The interbank lending rate or call money rateedged down to 13.366 percent from Wednesday's close of 13.817 percent.
For secondary market bond and bill rates, please see <0#LKBMK=>.
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