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UPDATE 1-Sri Lanka shares rebound, jump as much as 5 pct

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COLOMBO, Aug 10 (Reuters) - Sri Lanka's benchmark share index .CSE jumped more than 5 percent on Tuesday, clawing back early losses, as investors hunted for bargains after heavy selling in recent sessions sparked by regulatory curbs on how much share prices can move.

The index .CSE ended 4.7 percent higher at 5,092.94 points, off the day's highs, after slumping more than 2 percent in early trade. Asia's top performing stock market this year had slumped nearly 7 percent since the Securities and Exchange Commission announced last Thursday that it would limit daily share price moves to 10 percent after detecting unusual changes in some stocks. [ID:nSGE6720EG], [ID:nSGE6730L1]

The regulator said on Tuesday that the limit would remain in place despite the sharp price declines in recent sessions, dampening hopes that it may ease the curbs.

Danushka Samarasinghe, an economist at Frands Consultants, said the market had already appeared somewhat overbought before the SEC move, but added that its broader uptrend still appeared intact, citing strong earnings and economic growth.

“If there had been margin calls or forced selling, then we would have seen a (real) correction.”

The main index is still up 50 percent in the year to date.

It hit a record high last Tuesday, which analysts have attributed mainly to speculative buying. Some analysts said state funds had also pushed up the market, while others blamed manipulative trading.

Daily average turnover has jumped nearly four times this year, compared to last year’s 593.6 million rupees (5.3 million).

Foreign investors have bought a net 7.37 billion rupees ($65.6 million) of local shares since May 31, after selling a net 17.6 billion rupees in the first five months, bourse officials said.

The index is now trading at about 20.7 times historical earnings, well above major markets such as Hong Kong .HSI (16.9 times), but not as high as Japan .N225 (31.9 times) or Australia .AXJO (31.3 times), according to Thomsonreuters StarMine Smart estimates which puts more weight on recent forecasts by top-rated analysts.

Based on expected 12-month forward earnings, the Colombo index is the most expensive in the region with a price-earnings ratio of 16.7 times compared with 14.4 for India’s main index, 14.1 for China and around 12 for both Hong Kong and Australia.

The index’s price-earning ratio was around 11 when the island nation ended a 25-year civil war in May last year, reviving interest among foreign investors and sparking a stock rally. (Reporting by Shihar Aneez; Editing by Kim Coghill)