Sri Lankan shares hit a record high on Monday led by local buying in hotel and travel shares on hopes of post-war boom in the tourism industry as bookings have started to peak this year, brokers said.
The All-Share Price Index .CSE of the Colombo Stock Exchange rose 0.66 percent to a new record high of 3,849.23 points in the early trade, surpassing its previous all-time high hit on Wednesday.
It closed 0.28 percent up at 3,835.06, extending its rise in the previous two sessions.
"Tourism shares boosted the market," said Prashan Fernando, chief operating officer at Acuity Stockbrokers. "Most hotels are already booked due to the boom after the end of the war."
In the eight months since the end of the war in May, tourist arrivals have risen 21.7 percent versus the same period a year earlier, after falling 19.8 percent in the first five months of 2009 due to the war. [ID:nSGE61909Z]
Hotels and tourism index .CSEHT hit a new peak led by a 2.9 percent gain in John Keells Hotels KHL.CM and a 9 percent rise in Taj Lanka Hotels TAJ.CM.
Analysts also said local investors dominated buying as they have less options for investments as the central bank has kept key policy rates at multi-year lows, while foreigners have dominated selling side.
Normally, local investors prefer to invest in high interest rate bearing fixed deposits, but low interest rates have driven them to the stocks.
Foreigners have been net sellers in 34 out of the 42 trading sessions so far this year, amid the island nation’s budget deficit woes. See [ID:nSGE6200D7] Sri Lanka’s 2009 budget deficit hit an eight-year high of 9.7 percent of GDP, well over the 7 percent target set by the International Monetary Fund for a $2.6 billion loan and the country will miss the 2010 target as well. [ID:nSGE6210HH]
The IMF last on Feb. 25 said it would delay a third tranche of the loan until it sees the budget after the April 8 parliamentary polls. [ID:nSGE61O0GP]
Foreigners were net buyers of 16.5 million rupees worth of shares on Monday.
Foreigners, who had been net buyers since 2001, turned net sellers in 2009, selling 785.3 million rupees worth of shares. They have sold 5.5 billion rupees worth shares so far this year and 3 billion rupees since the Jan. 26 presidential polls.
However, analysts say the numbers are distorted due to the gradual exit of a U.S.-based hedge fund after its Sri Lankan-born founder was charged in an insider dealing case.
Sri Lanka will hold legislative elections on April 8. For Sri Lanka’s key political risks, see [ID:nRISKLK]
The bourse is up 13.3 percent so far this year, following a 125 percent rally in 2009, one of the best performers in Asia.
The day’s turnover was 838 million rupees ($7.3 million), more than the 2009 daily average of 593.6 million rupees. The Sri Lankan rupee LKR= closed firmer at 114.15/18 per dollar, compared with Friday’s 114.22/25, as a state bank, which represents the central bank, reduced its dollar buying rate by 5 cents, dealers said.
Sri Lanka has decided to implement several measures to relax its foreign exchange regulations with effect from March 11, aiming to improve investor confidence, the central bank said on Monday. [ID:nSGE6270GA]
The interbank lending rate or call money rate CLIBOR edged down to 9.234 percent from Friday’s 9.320 percent.
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