Traders sit below an electric stock board while working on the floor of the Colombo Stock Exchange in the central business district of Colombo, Sri Lanka. (Photo: Kuni Takahashi/Bloomberg via Getty Images)

Sri Lankan shares ended firmer for the third straight session yesterday to hit a near one-month closing high on local buying, even as foreign investors continued to pull out funds from equities, while the rupee ended slightly stronger.

The benchmark stock index ended 0.23 per cent firmer on at 5,335.29, its highest close since May 9. It fell 0.24 per cent last week and declined 11.9 per cent this year so far. The index had hit its lowest level since May 17 last Thursday.

The Central Bank cut its key interest rates on May 31 to support a faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April.

Sri Lanka is unlikely to hit its full-year economic growth target of 3-4 per cent following the bombings, State Finance Minister Eran Wickremeratne told Reuters last month. A Reuters poll has forecast growth to slump to its lowest in nearly two decades this year.

The government’s pension fund has resumed investing in risky assets as the stock market is “extremely undervalued at the moment and is considered a good time to go in”, the Central Bank Governor said last month at its monetary policy meet.

Tuesday’s stock market turnover was 411.7 million Sri Lankan rupees ($2.33 million), its highest since May 28 but below this year’s daily average of about 529.9 million rupees. Last year’s daily average was 834 million rupees.

Foreign investors sold a net 183.1 million rupees worth of shares on Tuesday, extending the year-to-date net foreign outflow to 5.71 billion rupees.

The rupee ended at 176.30/60 per dollar, compared with Friday’s close of 176.40/50, Refinitiv data showed.

Analysts expect the rupee to weaken further as money flows out of stocks and government securities.

The rupee fell 0.03 per cent last week but is up 3.57 per cent for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January.

The rupee dropped 16 per cent in 2018 and was one of the worst-performing currencies in Asia.

Foreign investors sold a net 3.5 billion rupees worth of government securities in the week that ended on June 4, extending the island nation’s net foreign outflow to 21.9 billion rupees so far this year, central bank data showed.