Shares up but foreign investors continue to leave.

The Colombo stock exchange hit a new record high of 3843.67 points on Monday, March 1 but foreign investors continued selling their holdings amidst political and economic concerns.

The All-Share Price Index .CSE of the Colombo Stock Exchange share price gains were led by retail buying.

"It's retailer-driven and the market will further go up due to retailers," said Jaliya Wijeratne, director of institutional sales at SMB Securities.

"Foreigners have been leaving due to problems in their own countries." Wijeratne added.

However most analysts said the exit of the foreigners was due to Sri Lanka's own political and economic concerns as other emerging markets are still seeing foreign investment inflows.

A recent decision by the International Monetary Fund to withhold the third tranche payment of a eight tranched loan, President Rajapakse's populist tax cuts and volatile political landscape has had an adverse impact on sentiment of foreign investors, closely monitoring Sri Lanka as a "frontier economy" since the end of the war.

Analysts say many investors will take a wait-and-see approach until they are sure about a degree of political and economic stability under relatively prudent fiscal management.

Foreigners were net sellers for 15 million rupees worth of shares on Monday, March 1. They have been net sellers in 30 out of the 37 trading sessions so far this year.

Foreigners, who had been net buyers since 2001, turned net sellers in 2009, selling 785.3 million rupees worth of shares. They have sold a net 5.1 billion worth shares so far this year and 2.54 billion rupees since the January 26 presidential election results were announced.

The bourse is still up 13 percent so far this year, following a 125 percent rally in 2009, one of the best in Asia.