Sri Lankan stocks fell to a 12-week closing low on Thursday as investors pulled back over worries the defection of some ruling party members would result in a hung parliament after the January 8 presidential polls. The main stock index closed down 0.89 percent or 63.83 points at 7,115.89, its lowest since September 5, after falling 1.6 percent earlier in the session.
Eight loyalists from President Mahinda Rajapaksa's United People's Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced the snap poll last week. "The crossovers have raised concern over the political stability of the government and some believe it could result in a hung parliament, resulting in political instability," a stockbroker said on condition of anonymity. "At the moment, it is not clear who will win. But if we see a massive defection in parliament towards one side, then it will be clear who is going to win and that will help the market rebound."
Thursday's turnover was 1.32 billion rupees ($10.08 million), exchange data showed, less than this year's daily average of 1.44 billion rupees. Foreign investors bought a net 320.1 million rupees worth of stocks, extending purchases during the year to 20.12 billion rupees, exchange data showed.
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