Sri Lankan shares closed at their highest in nearly 1-1/2 years yesterday, led by blue chips, due to an improved appetite for risky assets after heavy foreign buying amid hopes of a rate cut at the central bank’s policy meeting later this week.

The main stock index rose 1.32 percent, or 80.51 points, to 6,201.68, the highest close since Nov. 14, 2011.

“Investors are upbeat after foreign investors have been buying continuously.

Retail i nvestors are also on the buying side as they hope for a rate cut on Friday,” a stockbroker said on condition of anonymity.

Shares have been on a rising trend on expectations of a fall in interest rates after Treasury Secretary P.B. Jayasundera and the central bank said interest rates could ease in May-June. The market has gained 7.3 percent since the treasury secretary’s comments on April 9.

The International Monetary Fund, however, said on Thursday Sri Lanka must not loosen monetary conditions as inflation remains a concern, even though prices had risen at a slower pace in April than the previous month.

Shares in market heavyweight John Keells Holdings rose 1.65 percent to Rs.264.50 a share. The turnover was Rs.1.39 billion ($11 million), more than this year’s daily average of Rs.1 billion.

Foreign investors were net buyers of Rs.248.8 million of shares, extending the net foreign inflow so far this year to Rs.9.21 billion. Last year, the bourse saw a net inflow of $303 million.

The rupee ended at 126.30/37 per dollar, firmer from Monday’s close of 126.40/50, on exporter dollar sales, said currency dealers.

(REUTERS)