Shares on the Reykjavik stock exchange plunged by 76 per cent when trading resumed after three days of closure as Iceland’s economy continued to teeter on the brink of collapse.
Shares later recovered to leave the OMX Iceland 15 index down 47 per cent in morning trade.
Market officials said the astounding figure was misleading since the country’s three largest banks – Kaupthing, Landsbanki, Glitnir – which had accounted for three quarters of the exchange’s value, had been removed from the index after they were nationalised last week.
Other financial stocks would remain on the index but would not resume trading until Iceland’s Financial Services Authority gave the green light, the bourse said.
Not counting financial shares, the main index had shed 5 per cent in early afternoon trading.
Trading in three other financial stocks – Straumur-Burdaras, Reykjavik Savings Bank (Spron) and Exista – remain suspended.
The exchange had been suspended since Thursday with the last official trade coming on Wednesday.
A delegation of Icelandic officials began talks in Moscow today over a €4 billion loan to help the country’s financial sector. The head of the Icelandic delegation said that there had been no discussion so far on a Russian loan amount to Iceland but the group had received an “excellent reception.”
However, the party does not included any ministers or the Icelandic central bank’s chief, suggesting that negotiations have some way to go before politicians become involved.
Iceland needs Russia’s money to help rebuild its battered economy after the country of 300,000 people became the most potent symbol of the damage wrought by the global credit crisis.
The UK has also offered to lend up to £100 million to Landsbanki, one of three banks taken over by the Icelandic Government, to help facilitate prompt compensation for British savers whose money has been trapped in Icesave’s administration.
Iceland has turned to oil-rich Russia for help, where a €4 billion loan would be worth around one per cent of Russia’s gold and foreign exchange reserves.
Moscow has unveiled a rescue package for the Russian market worth more than $210 billion, but analysts say capital flight may not stop until global financial markets stabilise.
Helping Iceland could help to ensure that happens, although Russia’s move is widely regarded as politically motivated.
Last week, Iceland said the loan could be for between three and four years at an interest rate of between 30 and 50 basis points above Libor.
October 14, 2008
Source: Times Online