Reuters - Jan 18 Sri Lankan stocks closed slightly weaker on Wednesday, falling for a third straight session, as investor sentiment took a hit on uncertainty over foreign investments and rising yields on short-term government securities.

Yields on treasury bill auctions rose 1-16 basis points at a weekly auction on Wednesday to a four-month high after the central bank governor signalled reduced intervention to defend the rupee currency.

The Colombo stock index ended down 0.02 percent at 6,185.01, stepping away from its highest close since Dec. 30, hit on Friday, when it gained after the European Commission proposed increased market access for Sri Lanka as a reform incentive.

"There is no positive news and the market is going through a stalemate situation," said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

"The interest rates are rising and uncertainty is hurting the market."

Investors are concerned over possible political uncertainty as the main coalition partners in government are contesting local polls, likely mid-year, separately, analysts said.

They are also concerned over delays in foreign investments as the economy is still in the recovery process after facing debt and balance of payments crisis last year.

Turnover stood at 171.4 million Sri Lankan rupees ($1.14 million) on Wednesday, lowest since Dec 27.

Foreign investors sold a net 70.6 million rupees worth of equities on Wednesday extending the year-to-date net foreign outflow to 1.63 billion rupees worth of shares.

Shares in Lanka Hospitals Corporation Plc fell 3.66 percent, while Aitken Spence Hotel Holdings Plc dropped 3.04 percent and Nations Trust Bank Plc slid 2.28 percent.