S.Lankan shares up 1.4 pct as Dubai deal stars

By Shihar Aneez

COLOMBO, July 28 (Reuters) - Sri Lankan shares rose 1.41 percent on Monday to their highest close in more than a week, pushed up by the foreign buying of a majority stake in Associated Motorways AMW.CM, which boosted investor confidence.

Dubai-based engineering firm Al-Futtaim bought 71 percent of the Sri Lankan motor vehicle company, 20 percent previously held by John Keells Holdings JKH.CM and 51 percent by Associated Electrical Corporation AEC.CM, analysts said.

Associated Motorways is the sole agent for Nissan vehicles and Yamaha motorbikes in Sri Lanka. The shares were bought at 174.50 rupees each. See [ID:nCOL259149].

"This foreign buying boosted the market confidence," said Hussain Ghani, assistant director at Asia Securities. "Though the deal was block trading, foreign interest in the bourse gave much needed investor confidence."

The All-Share index .CSE closed 33.49 points firmer at 2,403.59, its highest close since July 18.

The bourse hit a near two-year closing low on Tuesday, and is still down 5.4 percent in 2008.

The market has been hit by worries about the civil war and high inflation and interest rates. Investors expect the difficult economic conditions will weaken corporate earnings.

Shares in Associated Motorways closed up 2.65 percent at 174.50 rupees a share calculated on a weighted average. It accounted for around 94 percent of the day's turnover of 7.74 billion rupees ($72 million), well over last year's daily average of 400 million rupees.