Earnings boost S.Lanka stocks but air strikes a worry

COLOMBO, July 27 (Reuters) Sri Lankan stocks ended slightly firmer on Thursday as a new batch of blue chip company financial results come in, but many remained wary as the air force bombed Tamil Tiger positions for the second day running, traders said.

The Colombo All Share <.cse> index rose 0.37 percent to close at 2,219.31 points. Turnover was 198 million rupees (.3 million), broadly in line with the daily average so far this year.

The stock market is up over 15 percent so far this year, but lost ground after the bloodiest period since a 2002 truce killed more than 800 people so far this year and kindled fears of a return to civil war.

Sri Lanka's air force bombed a suspected rebel airstrip in the northern district of Mullaithivu on Thursday, while ground troops prepared for an incursion to end a water supply blockade in the east.

''The market slowed down with the air strikes but held gains because of the good earnings,'' said Prasanna Chandrasekera, assistant manager at John Keells Stockbrokers in Colombo.

Shares in market heavyweight, leading mobile operator Dialog Telekom gained 1.22 percent to close at 20.75 rupees a share.

After the market closed, Dialog reported its first half group net profit rose 43 percent from a year earlier to 4.93 billion rupees (.4 million) thanks to subscriber growth.

Shares in conglomerate John Keells Holdings closed 0.19 percent lower at 130 rupees a share.

Keells announced on Wednesday its net profit rose 25 percent during the April-June quarter to 491.6 million rupees (.72 million) thanks to growth at its transport arm, but warned war fears had hit its hotels business as it strives to recover from the 2004 tsunami.

Sri Lanka's rupee closed a shade firmer at 103.98/ 103.99 compared to Wednesday's close of 103.99/104.01.

Call rates transacted in the brokers' market were 11.138 percent compared to Wednesday's 11.175.

REUTERS SBA ND2048