Sri Lankan shares fell on Friday, posting a yearly decline of about 10 percent, in thin trade due to year-end holidays, while investors waited for directions from the central bank on the rupee and interest rates. The central bank is most likely to keep its key interest rates steady at a monetary policy meeting later in the day, even as some economists expect further tightening to ease pressure on the rupee following a rate hike by the US Federal Reserve earlier this month, a Reuters poll showed.

Speculation over possible depreciation of the rupee and rate hikes weighed on sentiment, stockbrokers said. The Colombo stock index closed 0.28 percent lower at 6,228.26, declining 9.7 percent in 2016, its second straight yearly fall. In terms of dollar value, market capitalisation fell 13 percent, making Sri Lanka a worse performer than emerging Asian markets like Malaysia, Thailand, Indonesia and Singapore.

Foreign investors sold a net 6.4 million rupees of equities on Friday, but purchased a net 633.5 million rupees ($4.24 million) in 2016, compared with a net sell of 4.43 billion rupees last year. Turnover stood at 202 million rupees, less than a third of this year's daily average of 737.2 million rupees. Last year's daily average was 1.06 billion rupees. Large cap Ceylon Tobacco Co Plc fell 0.6 percent, while Lion Brewery (Ceylon) Plc lost 3 percent.

Copyright Reuters, 2016