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Pre-poll uncertainty drags S. Lanka stx to 2-wk low

[Reuters, Wednesday, 25 November 2009 14:00 No Comment]

Sri Lankan shares .CSE closed 0.59 percent weaker to a two-week low on Wednesday as investors stayed on the sidelines amid political concerns following a call for an early presidential poll. The All-Share Price Index .CSE of the Colombo Stock Exchange closed 16.85 points weaker at 2858.54, its sixth straight fall and lowest since Nov. 11.

"Political concerns have forced investors to stay away from the market," Prashan Fernando, executive director at Acuity Stockbrokers, told Reuters. "

Sri Lanka president Mahinda Rajapaksa called a presidential poll for mid-January, amid speculation that General Sarath Fonseka, who oversaw the end of a 25-year war, may challenge him. [ID:nSP498096]

Fonseka, who stepped down last week, is being considered as the common candidate by two main opposition parties, though he is yet to make a formal announcement on entering politics and challenge his former commander-in-chief. [ID:nCOL362269]

On Tuesday, Fonseka petitioned the Supreme Court to order the government to provide him with increased security before a possible poll bid. [ID:nCOL480109]

Analysts and traders said investors were concerned over the latest political developments and uncertainty as Fonseka was now seen as a candidate who could challenge Rajapaksa in the poll, which was earlier expected to be won easily by the incumbent.

These concerns prompted investors to steer clear of borrowing funds at cheaper rates after the central bank cut its key policy rates to multi-year lows last week to spur faltering economic growth. [ID:nCOL91110]

Investor confidence in the island nation’s bourse, still one of this year’s best-performers in the world with a 90.2 percent year-to-date return, has been on the decline after the government on Oct. 13 announced it will hold elections by April.

The bourse has fallen over 8.7 percent since then.

For more political risks, click [ID:nSP478539]

Analysts also said investors were waiting to see the impact of divestment by Galleon hedge fund after its founder was last month charged with insider trading in the U.S. [ID:nN05365147]

Sri Lanka’s top private lender Commercial Bank of Ceylon COMB.CM fell 1.58 percent to 171 rupees, while top fixed-line phone operators Sri Lanka Telecom SLTL.CM closed 1.23 percent weaker at 40 rupees a share.

Total turnover was 293.7 million rupees ($2.57 million), well below last year’s daily average of 464 million rupees.

The Sri Lankan rupee LKR= closed flat at 114.40/50. It fell to a near two-week low on Monday due to importer demand for dollars.

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