REYKJAVIK (AFP) - After three full days of suspended trading, a disfigured Reykjavik stock exchange reopened Tuesday, shorn of the financial stocks that were long the cornerstone of Iceland's economy.
Due to "unusual market conditions," the Icelandic stock exchange, which had shed more than half its value since the beginning of the year, first suspended trading in all financial stocks on October 6 before shutting down completely on Thursday.When the bourse finally reopened its doors Tuesday morning, its OMX15 index immediately plunged more than two-thirds compared to its last close less than a week earlier.
Market officials quickly insisted the astounding 76 percent figure was misleading since the country's three largest banks, 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, the bourse said, but would not resume trading until Iceland's Financial Services Authority gave the green light.
Not counting financial shares the main index opened a mere 0.57 percent lower and closed down 5.84 percent.
"We have stripped the three main banks from the index. Earlier they accounted for 75 percent of the index," exchange spokeswoman Kristin Johannsdottir told AFP.
With those not included, "the index is mechanically down to 25 percent of its previous value," she explained.
The island's three main banks Kaupthing, Landsbanki and Glitnir, which were especially hard hit by the global credit crunch after years of aggressively expanding their businesses abroad, were taken over by the Icelandic state last week when they could no longer lay their hands on enough cash to keep going.
The Reykjavik stock exchange's chief executive, Thordur Fridjonsson, cautioned it would likely take a while for the country's financial stocks to resume trading.
"They will probably not be coming back for some time. The three main banks are not being listed since they are being placed under state control," he told AFP.
Trading in the stock of three other financial sector companies, the Reykjavik Savings Bank, Straumer-Burdaras and Exista, also remained suspended until further notice.
This means that of the 23 companies usually listed on the Reykjavik exchange, six will no longer be traded, at least in the short term.
Iceland's dramatically transformed stock exchange offers a clear indication of the massive blow dealt to the country's economy, recently based almost entirely on a financial sector that represented between eight and 10 times its gross domestic product.
The Nordic nation of 313,000 people, which over the past decade has seen its economy grow on average four percent a year with a peak of 7.7 percent in 2004, gone from prosperity to the brink of bankruptcy in a week.
In its ongoing struggle to boost Iceland's tortured economy, the central bank said Tuesday it had drawn on swap agreements with Denmark and Norway worth a total of 400 million euros (546 million dollars), and had begun negotiating a massive loan from Moscow.
Fridjonsson said the first day back up after last week's chaos had gone better than expected.
"This morning, there was a slight pressure down. I am relieved because many people out there thought the stocks would collapse," he said.
The International Monetary Fund (IMF) has sent a mission to evaluate the situation in Iceland, but Prime Minister Geir Haarde said the country had not yet decided whether to turn to the body for help with its financial meltdown.
"It's not like the IMF is here to take over the country," he said.
On the trading floor, in an unadorned room in a building on the outskirts of the capital, there was calm.
After the days of forced idleness, about half a dozen traders were again seated in front of their screens, which nonetheless remained bathed in red.
A newly-hired security guard stood on duty, where before trading was shut down last week the exchange was not guarded. "It's just preemptive. A lot of people are angry these days," he said with a shrug.
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