Sri Lanka rupee trade halted after devaluation; stx slip

Rupee trading freezes after devaluation
    * Investors wary of 2012 budget proposals
    * Stx down; foreign outflow at 51.7 million rupees

COLOMBO, Nov 21 (Reuters) - Sri Lanka rupee currency trading froze on Monday after President Mahinda Rajapaksa announced a surprise 3 percent devaluation with immediate effect in the 2012 budget speech to help exporters and cut import costs.

Central Bank Governor Ajith Nivard Cabraal said the devaluation will take effect from Tuesday, but assured that there will not be any further cut in the exchange rate in the immediate future.
  
"The rupee traded at 110.40 rupees a dollar before the announcement, but then the trading was totally halted," said a dealer asking not to be named. "There was a quote for 114.70 rupees in the market with a wide range, but everybody was waiting for the central bank's direction."

Analysts from both local and foreign banks in Colombo said they were surprised Rajapaksa announced the devaluation, since it is ordinarily the central bank's purview, but welcomed the move.
   
The rupee has been under tremendous pressure, with the International Monetary Fund urging more flexibility. Sri Lanka is in the middle of a $2.6 billion loan programme with the global lender.  
   
On Friday the rupee weakened to 110.38/40 a dollar from Thursday's 110.18/20, after a state bank sold dollars at 110.40, raising the dollar trading band by 20 cents to 110.00/110.40
from 109.80/110.20.
   
The stock market, which closed as the budget was being presented, fell 0.34 percent or 20.66 points weaker to 6,119.86 as many investors stayed on the sidelines, awaiting cues from the budget.
 
 Heavyweight John Keells Holdings PLC, which contributed to 60 percent of turnover, rose 0.34 percent to 175 rupees on last-minute local and foreign institutional interest.
   
Analysts said a budget proposal to redistribute 37,000 acres of unused state land given to plantations may hit the sector, while tourism shares may gain on some positive concessions.
 
 The day's turnover was 871 million Sri Lanka rupees ($7.9 million), lowest since Nov. 17 and well below last year's average of 2.4 billion and this year's 2.5 billion. Average turnover in the last 10 sessions has been 757 million rupees.
   
Total volume was 29.3 million shares, lowest since Nov. 11, against a five-day average of 62.3 million. The 30-day and 90-day average trading volumes were 57.8 million and 102.3 million. Last year's daily average was 67.9 million.
 
 The bourse has fallen 9.8 percent since Oct. 1 and it fell to Asia's eighth-best performer with a year-to-date loss of 7.8 percent after being on the top for most of 2011, and giving the best returns in Asia in 2009 and 2010.
 
The bourse saw a net foreign outflow of 51.7 million rupees on Monday, and thus far in 2011, offshore investors have sold 16.9 billion, and a record 26.4 billion in 2010.  Losers outnumbered gainers by 105 to 82 on Monday, Thomson Reuters data showed.
               
    FACTORS TO WATCH:
 - If the central bank can maintain a narrow dollar trading
range  
 - Rupee depreciation due to heavy importer dollar demand
 - Impact on the stock market due to acquisition bill
 - Impact on the 2012 budget