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Sri Lanka shares hit new high on retail buying

COLOMBO, April 30 (Reuters) - Sri Lankan shares rose to a new record on Friday led by retail buying on better earning hopes, despite foreign investors continued their exit strategy.

The All-Share Price Index .CSE of the Colombo Stock Exchange hit a new all-time high of 4197.22, surpassing its previous record high of 4,176.83 hit on Thursday. It closed 33.88 or 0.8 percent firmer at 4188.88.

“Retailers have pushed up the market to an expensive level,” said Prashan Fernando, chief operating officer at Acuity Stockbrokers. “Foreigners will wait until either see better earnings or the current prices to come down.”

Analysts said heavy retail buying has drove the bourse’s price-to-earning ration to over 20 now within one year since the end of the war in May last year.

Foreign investors sold a net 78 million rupees’ worth of shares, data showed. They have sold a net of around 16.4 billion rupees’($143.5 million) worth of shares so far this year.

They sold a net 789 million rupees last year and were net sellers for the first time since 2001.

“Foreigners might come back once they see the budget and disbursement of the IMF loan,” Fernando said.

Sri Lanka will introduce fiscal reforms including tax changes in its 2011 budget, not in this year’s as had previously been pledged, the island nation’s treasury secretary said on Thursday.

President Mahinda Rajapaksa will authorise three months of expenditure until July 22, and then a mini-budget will be adopted for the rest of 2010, Treasury Secretary P.B. Jayasundera said. [ID:nSGE63S07Z]

Traders said the market would continue to move up with hopes of better earnings, post-war economic development and foreign direct investments under the newly elected stable government despite delay in the budget.

Investors had been expecting the government to come up with long-needed fiscal reforms to improve the investment climate. For Sri Lanka’s key political risks, see [ID:nRISKLK]

Traders said low interest rates kept turnover up.

Despite the trading hours reduced by three hours instead of usual five hours due to a special half day holiday for May day, the day’s turnover was 1.1 billion rupees ($9.6 million), well above the 2009 average of 593.6 million rupees.

Oil palm shares led by 13.8 percent jump in conglomerate Bukit Darah BUKI.CM and banking sector led by 1.96 percent rise in Hatton National Bank HNB.CM helped the market drive.

The bourse is up 23.7 percent so far this year, making it Asia’s best-performing market.

The market has shot up over 182 percent since it hit a four-year low on Dec. 30, 2008, rising in anticipation of the end of a 25-year war. That came in May and then an IMF loan in July helped boost investor confidence. The rupee currency LKR= closed firmer at 113.93/113.97 per dollar from Thursday's close of 113.98/114.00 as a state bank, though which the central bank drives the market, reduced its dollar trading band by 5 cents, currency dealers said.

The interbank lending rate or call money rate CLIBOR rose to 9.025 from Thursday's 9.006 percent.

For secondary market rates, please see <0#LKBMK=>. ($1=113.95 Sri Lankan rupees) (Editing by Ramya Venugopal)