S.Lankan shares hit 5-½ month low on economy woes

By Shihar Aneez

COLOMBO, July 4 (Reuters) - Sri Lankan shares fell 0.64 percent to a new 5-½ month low on Friday, as investors judged rising inflation and high interest rates were likely to lead to weak company results.

The Colombo All-Share index .CSE fell 15.52 points to 2,404.54, its eighth straight fall, and closed at its lowest since Jan. 21.

It has fallen 10.7 percent from an 11-month high on April 23, mostly due to worries about the economy and a long-running civil war with Tamil rebels.

"With high inflation and high interest rates, investors feel increased finance costs will result in poor corporate earnings," said Shivantha Meepage, a research analyst at HNB Stockbrokers.

"Investors are cautious and waiting for positive news, mainly on the economic front. Good news on the war front also could boost the market." The market had risen 2 percent between June 20 and 23 on speculation a visit by an Indian delegation was linked to efforts to restart peace talks to end a 25-year civil war. But that proved incorrect and the market has surrendered the gains.

Annual consumer price inflation rose to a 5-year high of 28.2 percent in June, while annual economic growth in the March quarter slowed to 6.2 percent from 7.6 percent in the previous quarter. See [ID:nCOL109662].

Market heavyweight Dialog Telekom DIAL.CM closed 1.82 percent weaker at 13.50 rupees, calculated on a weighted average.

Leading fixed-line telephone operator, Sri Lanka Telecom SLTL.CM fell 1.72 percent to 42.75 rupees a share, while food retailer Cargills Ceylon CARG.CM fell 2.44 percent to 40 rupees.