COLOMBO, July 12 (Reuters) - Sri Lankan shares closed at their highest in nearly three weeks on Tuesday, the fifth straight session of gains, as confidence in a new sovereign bond issued by the island nation helped boost investor sentiment.
Sri Lanka raised $1.5 billion in its first sale of dual-tranche eurobonds on Monday, at a lower borrowing cost than initially expected, as yield-hungry global investors put in over $5.5 billion in offers.
The benchmark Colombo stock index ended 0.5 percent higher at 6,401.31, its highest close since June 22. It gained 1.3 percent last week, its first weekly gain in four.
Investors, mainly local, bought into battered stocks after recent losses, although the day's turnover was moderate.
"We see some investor confidence after the sovereign bond sale. It shows there is a huge demand for Sri Lankan bonds. Market expects some of these foreign investors might come into shares in future," a stockbroker said asking not to be named.
Turnover stood at 562.6 million rupees ($3.87 million), below this year's daily average of around 736 million rupees.
Overseas investors, who have offloaded shares worth a net 5.29 billion rupees ($36.38 million) so far this year, bought equities worth a net 2 million rupees on Tuesday.
Shares have been on a downward trend recently, hitting their lowest close since April 7 on Monday after falling for 10 out of 11 sessions, on worries over a capital gains tax on stocks, high interest rates and policy uncertainty.
Shares in top mobile phone operator Dialog Axiata gained 1.9 percent, while top lender Commercial Bank of Ceylon rose 1.4 percent.
($1 = 145.4000 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Biju Dwarakanath)