Sri Lanka shares down 1 pct on weak sentiment

By Shihar Aneez

COLOMBO, Oct 26 (Reuters) - Sri Lanka's stock market .CSE lost 1.07 percent on Monday led by blue chips as retail investors sold them in thin trade as concerns over a U.S. insider trading case and the potential loss of an EU trade concession weighed.

The All-Share Price Index of the Colombo Stock Exchange fell 32.60 points to 3024.02. The index hit a five-week low on Wednesday due to U.S. insider trading charges against one of the biggest investors in Sri Lankan bourse.

The arrest of Sri Lankan-born Raj Rajaratnam, founder of the Galleon Group hedge fund, in New York on Oct. 16 helped fuel a 5 percent drop in the first two days of trading last week, given he or Galleon hold large stakes in several blue chip firms.

"Investors are waiting for market-moving news after the U.S. insider deal case," said Harsha Fernando, CEO at SC Securities.

Analysts said though the market trend is still positive, investor confidence has been hit by Rajaratnam's arrest, a possible loss of trade benefits from the European Union, and potential political risks ahead of national polls in early 2010.

The EU published a probe last week that found Sri Lanka in breach of human rights laws, which threatens its trade concession scheme from EU, but the central bank on Wednesday said the move will not hurt its exports. [ID:nLJ731429] [ID:nCOL522523]

For more political risks, click [ID:nSP539379]

On Thursday, the World Bank in a report said sustaining the positive investor sentiment will be the key challenge with a still-weak global economy, uncertainty over the EU concession, and high fiscal deficits posing the biggest risks to growth.