Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt

By Jakob Lindstroem

Oct. 14 (Bloomberg) -- Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks.

Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf collapsed this month with debts equivalent to as much as 12 times the size of Iceland's economy. The three banks accounted for about 76 percent of the ICEX 15 Index's value prior to the nationalization.

The OMX Iceland 15 Index fell 2,324.45 to 680.17 as of 2:07 p.m. local time. Four of the 13 other stocks in the index didn't trade, while the six that did accounted for about 8.5 percent of the index's weighting before today.

Trading was halted since Oct. 9 after the gauge lost 30 percent in nine days as the country's financial system collapsed. Iceland started talks in Moscow today to secure an emergency loan of as much as 4 billion euros ($5.47 billion) from Russia.

The country should seek aid from the International Monetary Fund and later apply for European Union membership and adopt the euro, Foreign Minister Ingibjorg Solrun Gisladottir wrote in Morgunbladid on Oct. 13.

``There's not that much left to trade,'' said Ross Porter, a Norway-based portfolio manager at Skagen ASA, which manages $10 billion. ``They will need capital.''

The OMX Nordic Exchange said in a release late yesterday that it set the prices of the three banks to zero in the index after ``not being able to receive valuations from market participants.''

Among the stocks that did trade today, Alfesca, a maker of salted fish products, dropped 0.85 krona, or 16 percent, to 4.6 kronur. Icelandair Group Holding hf, the country's largest carrier, retreated 0.7 krona, or 4.5 percent, to 14.8 kronur. Marel hf, an Icelandic meat-processing company, lost 0.2 krona, or 0.3 percent, to 71.5 kronur.

To contact the reporter on this story: Jakob Lindstroem in Stockholm at [email protected].

Last Updated: October 14, 2008 10