COLOMBO Feb 10 (Reuters) - Sri Lankan shares edged down for the third straight session on Wednesday, with turnover slumping to a 23-month low, as investors stayed off risky assets on concerns over rising domestic interest rates.
Shares moved in line with regional peers which fell on worries over the health of global banks, particularly in Europe, pushing investors into safer assets such as the Japanese yen.
The main stock index ended 0.13 percent weaker at 6,364.40, its lowest close since Feb. 1.
"Nothing is happening at all. Local investors are on the sidelines and the foreign investors are exiting and not taking positions," said Yohan Samarakkody, head of research, SC Securities (Pvt) Ltd.
"Market is holding on due to the earnings cycle. But I don't think there will be enough strength for the market to hold on after the earnings season is over as there is no liquidity."
Foreign investors sold a net 16.2 million rupees worth shares on Wednesday, extending the year to date net foreign outflow to 210.9 million rupees ($1.47 million) worth of equities.
The key Sri Lankan stock index has fallen 7.7 percent this year through Wednesday as foreign investors, unnerved by global concerns over China's economy, cut their exposure.
Some investors are shifting to fixed interest rate-bearing assets due to a gradual rise in interest rates, analysts said.
Yields on t-bills rose between 8 and 17 basis points at a weekly auction on Wednesday with the 182-day and the 364-day t-bill yields rising to over two-year highs, signalling a further rise in market interest rates.
Turnover was 182.4 million rupees, the lowest since March 2014 and less than a quarter of this year's daily average of 770.9 million rupees.
Shares of the biggest listed lender Commercial Bank of Ceylon Plc fell 0.9 percent, while Cargills (Ceylon) Plc and Ceylon Tobacco Company Plc fell 1.95 percent and 0.51 percent, respectively. ($1 = 143.90 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)