Bulgarian stock indices slumped to post new losses on September 30, following the lead of Asian and European markets hit by the news that the US house of representatives rejected the $700 billion plan to bail out ailing financial institutions.
The Sofix index of the 20 most liquid stocks closed 6.8 per cent down on the day at 792.48 points, recovering slightly from the eight per cent drop suffered in the first five minutes of the trading day.
The broader BG40 index, which tracks the 40 most liquid companies on the Bulgarian Stock Exchange (BSE), did better and shed only 3.2 per cent to end at 198.58 points, despite losing as much as 8.6 per cent early in the trading day.
"I think matters will settle down over the next few days because what we saw today was not an instance of panic that can lead to something worse," analyst Tsvetoslav Tsachev from Elana Holding told investor.bg website. "It is true that many leading stocks lost more than five per cent and that is not just a speculative move. Nevertheless, trading volumes are very small and these losses are recorded on the back of a very limited number of deals, nor is Bulgaria affected by the the same economic problems faced by the US and Western Europe."
Among the blue chips that lost most ground were Bulgarian-American Credit Bank (14.93 per cent), lead and zinc smelter OCK (12.14 per cent), mining firm Kaolin (6.36 per cent), First Ivestment Bank (6.15 per cent) and diversified holdings conglomerate Chimimport (6.09 per cent). Paints producer Orgachim was the only Sofix-included stock that finished the day higher, posting an increase of 1.52 per cent.
Of 113 stocks traded on BSE on September 30, 74 finished the day lower, with 25 edging higher and 14 unchanged. The market capitalisation of the bourse fell to 16.4 billion leva.
The downward trend on the BSE was unlikely to reverse while liquidity remained low, analysts have said, which made it unlikely that the bourse's indices could maintain a sustainable rise.
Elsewhere, markets bounced back after hopes were rekindled that the bail-out would still go through in some shape or form. With US president George W Bush saying he would continue to push for the plans to be adopted by the congress, the Dow Jones Industrial Average was up 2.1 per cent, while the Nasdaq Composite Index rose 2.5 higher shortly after the opening bell.
The FTSE 100 index in London and the CAC-40 in Paris were both buoyed into positive territory by the news, while the Dax index in Frankfurt was marginally lower. Russian stocks also rose in an extended session, Bloomber reported, after the local regulator suspended trading for two hours to stop the plummetting indices.
Bush's televised statement, however, came after trading on BSE closed and did not affect Bulgarian stocks, although a recovery is expected when the market re-opens on October 1.
The proposed rescue package would have seen the US treasury being allowed to spend $250 billion to buy banks' risky assets, giving them a much-needed cash infusion. There also would be another $100 billion for use at the US president's discretion and a final $350 billion subject to congressional approval.
But the predicament and baleful situation in which Wall Street found itself was further exacerbated by developments overseas.
European governments agreed to a $16.4 billion bailout for Fortis NV, Belgium's largest retail bank. The UK government promptly nationalised mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio, the Financial Times said.
