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Fri Dec 30, 2011 7:29am EST

* Had been top Asian bourse in 2009, 2010
    * Net foreign outflow down from 26.4 bln rupees to 19.1 bln

    COLOMBO, Dec 30 (Reuters) - Sri Lanka's main share
index shed 8.5 percent in 2011, falling from its perch as Asia's
best performer in the previous two years, as it closed weaker on
Friday in thin trade.
    The island nation saw foreign outflow of 19.1 billion Sri
Lanka rupees ($168 million) in 2011, compared with last year's
record high 26.4 billion.
    The market was Asia's best performer in 2009 and 2010 mainly
due to heavy local retail buying, as the country emerged from a
25-year war.
    This year, the Colombo bourse was Asia's 10th-best performer
with an annual loss of 8.46 percent. It held top spot in the
region until June.
    "We are optimistic in 2012 as interest rates are still low,"
said Hussain Gani, CEO at TKS Securities. "Even if rates go up
by 200 basis points, it (the market) will be attractive."
    The central bank has kept monetary policy rates at more than
six-year lows since January.
    On Friday, the main share index closed down 0.25
percent, or 14.96 points, at 6,074.42.
    The index hit a record high on February 15, but has since
fallen 22.8 percent due to a credit curb move by Sri Lanka's
Securities and Exchange Commission (SEC).
    In the fourth quarter, the resignation of two top SEC
officials, an asset takeover bill, a 3 percent devaluation, and
inconsistent investment policies dampened the market.
    On Friday, the market saw net foreign selling of 85.3
million rupees, mainly due to offshore investors selling
Commercial bank of Ceylon PLC after chairman MJC
Amarasuriya resigned.
    Offshore outflow in the four sessions through Friday was 1.2
billion rupees, with more than 90 percent of that generated by
Commercial Bank, traders said.
    The day's turnover was 525.7 million rupees, far below this
year's average of 2.3 billion.
    Last month, brokers, who complained tougher regulation was
hurting stock market prices, met President Mahinda Rajapaksa to
urge him to intervene in his capacity as finance minister to
revive the slumping bourse.
    The rupee closed flat at 113.89/90 to the dollar for
a 27th straight session, with the central bank selling around
$25 million to defend it, dealers said.
    The bank has spent around $690 million to keep the exchange
rate steady since a 3 percent devaluation on Nov. 21. It spent a
net $1.36 billion in the first nine months of the year to keep
depreciation pressure at bay.
  ($1 = 113.9 Sri Lanka rupees)	

 (Reporting by Shihar Aneez; Editing by David Hulmes)