COLOMBO, June 6 (Reuters) - Sri Lankan shares ended steady on Monday as concerns over rising interest rates and foreign outflows erased early gains from positive sentiment after an IMF loan approval.
Turnover was very low at 476.2 million rupees, well below this year's daily average of around 788 million rupees.
The International Monetary Fund's (IMF) executive board has approved a three-year $1.5 billion loan to support Sri Lanka's economic reform agenda, the global lender said on Saturday.
The benchmark Colombo stock index, which gained 0.46 percent in early trade, ended flat at 6,518.98. It declined 0.8 percent last week, losing for the third straight week after gaining six consecutive weeks.
Treasury bill yields rose between 4 and 35 basis points to near three-year highs in the last two weekly auctions through Wednesday despite the central bank leaving key policy rates steady for a third straight month on May 20.
"Market was up in the morning due to the IMF news," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.
"With high interest rates, investors are still on a wait and see approach and the biggest issue is the foreign outflow."
Investors are concerned about foreign outflows, with overseas investors offloading a net 92.3 million rupees worth of shares on Monday, extending the year-to-date net foreign outflow to 5.64 billion rupees.
Stockbrokers said a rise in interest rates could be detrimental to risky assets if they jumped beyond 12 percent. The average prime lending rate (AWPR) edged up 8 basis points to 10.23 percent in the week ended June 3.
Shares of Lion Brewery Plc fell 5.85 percent while shares of John Keells Holding Plc fell 0.19, dragging the overall index. ($1 = 146.8000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)