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Foreign exit of Colombo bourse continues

Foreign funds are continuing to exit Sri Lanka’s stock market, Reuters reported Friday, sustaining a trend since the end of the armed conflict.

[See also our post: 'Sri Lanka's stocks: a closer look']

Despite the bourse's main index doubling last year, foreign investors have been net sellers of the “overbought and expensive” market.

Foreigners have sold a net US$ 25 million (2.8 billion rupees) so far in 2011, after selling a record net $236 million (Rs. 26.4 billion) through 2010.

Sri Lanka’s bourse is described as ‘Asia's best performer’ with an 9 percent gain in 2011 after being the top performer last year, with a 96 percent.

It is trading at a forward price-to-earnings (P/E) ratio of 18, highest among emerging markets, compared with 13 in Asian markets and 11.9 in global emerging markets.

P/E is the price paid for a share divided by its estimated future earnings.


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