Sri Lankan shares end steady; turnover slumps to over 2-1/2 mth low

COLOMBO, June 8 (Reuters) – Sri Lankan shares closed steady on Wednesday, as positive sentiment after the IMF loan approval was offset by concerns over rising interest rates and foreign fund outflows.

Turnover was Rs390.8 million ($2.68 million), the lowest since March 19, and nearly half of this year’s daily average of around Rs782.5 million.

The benchmark Colombo stock index ended 0.03 percent higher at 6,526.12.

"We don’t expect a lot until the interest rates are down," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

Treasury bill yields have risen between 16 and 36 basis points to near three-year highs in the last three weekly auctions through Wednesday despite the Central Bank leaving key policy rates steady for a third straight month on May 20.

The International Monetary Fund’s (IMF) executive board approved a three-year $1.5 billion loan to support Sri Lanka’s economic reforms agenda, the global lender said on Saturday.

Investors are concerned about foreign outflows, with overseas investors offloading a net Rs38.2 million worth of shares on Wednesday, extending the year-to-date net foreign outflow to Rs5.7 billion.

Stockbrokers said a rise in interest rates could be detrimental to risky assets if they jumped beyond 12 percent. The average prime lending rate (AWPR) edged up 8 basis points to 10.23 percent in the week ended June 3.

Ceylon Cold Stores Plc rose 1.90 percent, Ceylon Tobacco Company Plc gained 0.91 percent and Sri Lanka Telecom Plc added 0.76 percent, while conglomerate John Keells Holdings Plc increased 0.32 percent.

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