T-bill yields reverse trend

Sri Lanka's benchmark share
index fell for a third straight session on Wednesday with a 1.8
percent fall as investors booked profits mainly in top blue
chips after a recent upward surge, analysts said.

Sri Lanka's main share index .CSE closed 1.84 percent or
128.67 percent weaker at 6,862.67. It is Asia's best performer
in 2010 with a 102.7 percent gain. The index had risen 26.3
percent since Sept. 1 through Friday.

The bourse was driven down by blue chips led by 2.4 percent
fall in market heavyweight John Keells Holdings JKH.CM and
4.4 percent drop in top fixed-line phone operator Sri Lanka
Telecom SLTL.CM.

The fall of 4 percent in the last three sessions has almost
brought down the index to the neutral region from an overbought
zone with the 14-day relative strength index (RSI) at 70.3,
just above the upper neutral limit of 70, Thomson Reuters data
showed. The index was at 92.4 on Friday.

It is trading at the highest forward price-to-earnings
ratio in Asia and global emerging markets at 22.1 times,
compared with 13.2 for all Asia and 12.1 for global emerging
markets, Thomson Reuters StarMine data showed.

Market turnover was 2.7 billion rupees ($24.5 million),
more than four times the 2009 average. Foreign investors sold a
net 300.4 million rupees in shares and they have overall sold
17.1 billion rupees' worth this year.

The rupee LKR= edged down to 111.72/75 from Tuesday's
21-month high close due to importer demand for dollars, though
the central bank reduced the dollar trading band by 10 cents to
111.60/112.00, currency dealers said.

Yields in T-bills reversed their downward trend, which
analysts attributed to high inflationary expectations.
[nSGE6950B7]

FACTORS TO WATCH:

- Extent of the technical correction

- The impact of higher inflationary expectations

- Tax reforms promised by the government and how it
proceeds with fiscal reforms agreed with the IMF

DATA

Colombo Stock Exchange:

Stock Market Volume (Shares)

Current Volume            Average Volume 90 Days        
66,664,533                        83,376,300

Yield and Price of Sri Lanka's sovereign bonds:

Maturing year   Tenure    amount      Reuters
yield LK032736246=     2012       5-yr    $500 mln    
3.747-3.443 LK045930114=     2014       5-yr    $500 mln    
4.913-4.758 85227SAH9=RRPS   2020      10-yr  $1,000 mln   
6.1213-5.9877

*  For Sri Lankan treasury securities benchmarks and data,
please click LKBMK= and LKCMTBMK=

* For interbank lending rate or call money rate CLIBOR or
CLIBOS

* For secondary market rates, please see <0#LKBMK=>.
 ($1=111.725 Sri Lankan rupees)
 (Reporting by Ranga Sirilal and Shihar Aneez; Editing by
Bryson Hull)