Sri Lanka shares fall below key barrier; banks lead

COLOMBO, July 2 (Reuters) – Sri Lankan shares ended at a 2-1/2 month low on Thursday, falling below a key psychological barrier of 7,000 points, led by banks and telecommunication shares as political uncertainty ahead of parliamentary elections weighed on sentiment.

The main stock index ended 0.54 percent weaker at 6,982.80, its lowest close since April 15.

The day’s turnover was 435.6 million rupees ($3.26 million), well below this year’s daily average of 1.06 billion rupees.

"We expect more volatility until the nominations are over and even after that the market will be sideways till the elections are over," said Danushka Samarasinghe, head of research at Softlogic Securities.

President Maithripala Sirisena dissolved parliament on Friday and scheduled elections for Aug. 17, in an effort to consolidate power and push through political reforms.

The deadline for the nominations is July 13.

Samarasinghe said the index falling below its psychological barrier of 7,000 could lead to a fresh round of selling, specially by small-time investors.

The market saw a net foreign outflow of 17.8 million rupees on Thursday, after recording a net outflow of 4.17 billion rupees over the past 26 sessions.

However, foreign investors are net buyers of 1.77 billion rupees worth of shares so far this year.

Shares in DFCC Bank Plc fell 3.75 percent, while Sri Lanka Telecom Plc declined 1.81 percent.





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