* Market rises 0.71 percent
* Hotel, banking shares hit new record high
* Rupee weaker on importer demand for dollars
COLOMBO, Aug 27 (Reuters) - Sri Lanka’s benchmark share index rose on Friday led by banking and hotel shares on hopes of strong earnings due to increasing credit growth and the start of tourism season in the island nation.
Sri Lanka’s main share index .CSE rose 0.71 percent or 39.85 points to 5,634.15 points. It hit an all-time high of 5,679.14 on Friday and is up 1.28 points for the week.
The bourse is Asia’s best performer, with 66.4 percent gain so far this year, although analysts have said the bourse has overheated with local retail investors chasing speculative shares instead of fundamentally sound stocks.
The Banking, financial, and insurance .CSEBF, and hotel and travel sub sector .CSEHT indices hit new record highs on Friday.
“Credit growth and high tourist arrival with the start of the season have boosted investor confidence in those shares,” Danushka Samarasinghe, an economist at Frands Consultant, told Reuters.
Sri Lanka’s private sector credit had grown by 6.2 percent month-on-month, the highest for this year, while earnings from tourism in the first seven months have jumped 69 percent.
Leasing firm Capital Trust LOLC.CM, formerly Lanka Orix Leasing Company, and Taj Lanka Hotel TAJ.CM each jumped 10 percent.
Information technology product trader PC House PCHO.CM, which started trading on Thursday, closed 9 percent weaker at 10 rupees.
Turnover was 2 billion rupees ($17.1 million), more than three times the 2009 daily average. Foreign investors bought a net 11.7 million rupees’ in shares. They have overall sold a net 11.3 billion rupees of stock so far this year.
The rupee LKR= edged down to 112.70/77 per dollar, from Thursday's 112.60/65 on importer demand for dollar, dealers said. ($1=112.735 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Karen Foster)