(Corrects the name and designation of the analyst in paras 6 and 8)
COLOMBO, Aug 10 (Reuters) - Sri Lankan shares recovered from a three-and-a-half month low on Thursday, snapping a nine-session losing streak, as investors bought battered shares.
The Colombo stock index rose 0.16 percent, or 10.29 points, to 6,516.32, edging up from its lowest close since April 25 hit on Wednesday. It fell 1.5 percent last week in its third straight weekly drop.
"Market moved up on bargain hunting and (there was) less selling pressure. We have seen the bottom for the moment and we have to see whether it will sustain," said Dimantha Mathew, head of research at First Capital Holdings.
Mathew said the resignation of Sri Lanka's foreign minister Ravi Karunanayake, a former finance minister, also helped boost the market.
Sri Lanka's foreign minister resigned on Thursday over corruption charges in an investigation of alleged irregularities in government bond sales, maintaining that he was not guilty of wrongdoing.
"The resignation reduces risk of a splintering in the governing coalition," said Hasnain Malik, Global Head of Equities Research at London-based frontier markets investment bank Exotix Capital, active in South Asia.
The coalition government between President Maithripala Sirisena's centre-left party and Prime Minister Ranil Wickremesinghe's centre-right party had differences over the alleged corruption deal, risking the stability of the government.
"We regard Sri Lanka equities as cheap versus history and the exchange rate as lower risk than before, now it is under the IMF umbrella, but we still see a struggle for sustainable growth," Malik said in an emailed comment.
Foreign investors net bought shares worth 98.5 million Sri Lankan rupees ($642,740.62) on Thursday, extending their year-to-date net inflow to 26.7 billion rupees.
Turnover stood at 306.6 million rupees, less than half of this year's daily average of around 880.6 million rupees.
Shares of Dialog Axiata Plc rose 0.9 percent while, Ceylon Tobacco Company Plc gained 1.1 percent and Sampath bank Plc ended 2.9 percent higher.
Analysts, however, expect equities to gain due to a fall in government bond yields.
Short-term treasury-bond yields fell between 10 basis points (bps) and 16 bps at a weekly auction on Wednesday, while the yields on a 59-month bond dropped by 99 bps and that on a 118-month bond fell by 78 bps at the last week auction. ($1 = 153.2500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)