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Bond yields rise, on rising inflation; tourism stocks drag Colombo bourse down

May 31, 2006 (LBO) - Stocks in Sri Lanka weakened as investors shied away from tourism related firms fearing a European wide ban on Tamil Tiger rebels and continuing violence would deter tourists from visiting the island, brokers said. Overall sentiment remained weak as investors were rattled over a two-hour artillery exchange between the rebels and the military along the Muhamalai front line in the Jaffna peninsula this morning.

The broader market's All Share Price Index slumped 14.06 points or 0.63 percent to 2,203.82, according to the Colombo Stock Exchange.

Total turnover was healthy at 215.

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47 million rupees up from Wednesday's close of 94.62 million rupees, with foreign selling exceeding buying orders by 19.
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351 million rupees.

The liquid Milanka Price Index which tracks 25 stocks, shed 7.



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95 points or 0.28 percent to 2,817.27.

Aitken Spence Hotel Holdings - which has properties in Sri Lanka and the Maldives - led the decliners, falling 6.0 percent to 70.00 rupees.

Keells Hotels Ltd - the island's biggest hotel chain operator with properties in Sri Lanka and the Maldives - fell 17.


25 rupees to 75.25 rupees.

On the foreign exchange market, the Sri Lankan rupee softened against the U.S. currency on light trade as few banks bought dollars on behalf of importers to settle few trade bills, traders said.

The greenback opened at 102.96 rupees but closed up 102.98 rupees amid slim volumes.

Call rates in brokers markets rose to 10.85 percent from Tuesday's close of 10.



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75 percent, as the money market liquidity swung into a 100 million rupee surplus from Monday's deficit of 700 million rupees.

Traders expect the surplus to remain, as the market adjusts itself for around 25 billion rupees worth of bonds which mature during the first week of June.

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On the bond market, 6,535 million rupees in treasury bills were auctioned Wednesday, but the Central Bank accepted bids worth 4,535 million rupees.

Yields remained flat with 3-month paper at 10.

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09 percent, 6-month notes at 10.36 percent and one-year treasuries at 12.

38 percent.

Secondary market bond activity picked up by about 5-basis points after May inflation data rose to 13.2 percent on a point-to-point basis.

Yields for two-year paper rose to 11.00 percent, 3-year notes to 11.

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10 percent, from Tuesday's close of 11.08 percent. Four-year treasuries rose to 11.
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25 percent over 11.18 percent on Tuesday, while 5-year bonds traded at 11.30 percent from yesterday’s close of 11.30 percent.
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