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S.Lanka shares at new record high on growth, rates

[Reuters, Tuesday, 6 October 2009 13:23 No Comment]

Sri Lanka’s stock market .CSE hit a new record high on Tuesday led by domestic investor optimism over strong post-war economic growth, declining interest rates and easing inflation, analysts and traders said.

The All-Share Price Index of the Colombo Stock Exchange jumped 1.88 percent firmer to 3,156.37 points, surpassing its previous all-time high of 3,115.25, hit on Monday.

It closed 0.95 percent or 29.32 points firmer at 3,127.56.

With a return of over 108 percent so far this year, it is the second-best performing bourse in the world after Lima’s stock market . Its rise is around double that of the benchmark emerging market equities index .MSCIEF.

The market capitalisation hit a record high of over 1 trillion rupees ($8.7 billion) on Tuesday, the bourse said.

"The market has gone past everybody’s expectations," Harsha Fernando, CEO at SC Securities, told Reuters. "The rise is totally fuelled by retailers and the market is running out of steam. We expect a correction tomorrow."

Sentiment, mainly domestic-driven, has also been boosted by a fall in inflation to a record low of 0.7 percent in September and a decision the same month by the central bank to cut its policy rates by 50 basis points.

High post-war economic growth hopes, more market liquidity, a $2.6 billion IMF loan, an upgraded rating outlook and foreign inflows have overall boosted investor confidence since the end of a 25-year war against the Tamil Tiger rebels in May

The bourse has risen 63.9 percent since then, making the world’s best performing market in the last six months with an 89.23 percent return.

Analysts and traders said though there have been a lot of queries from foreign funds on the bourse, they are yet to see inflows into the market.

As of Tuesday, net foreign inflows totalled 613.2 million rupees ($5.34 million) this year, a fraction of the 14.1 billion rupees seen in 2008.

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