LISBON’S STOCK market suffered its worst week ever at the end of June with 22 billion euros being wiped of the value of PSI-20 share index company shares.
On Tuesday alone, Portuguese companies on the PSI-20 Index saw share values plummet by five per cent, wiping three billion euros of their value.
The Bolsa de Valores de Lisboa, which lists the share trading activities of the country’s top companies, has seen share values nose-dive by 30 per cent overall since January.
The performance of Portugal’s banking sector was mainly responsible for the collapse as banks sought to offload shares and bonds guaranteed to cover risky loans.
It has been the worst period for share trading since 1993 as other key world stock markets also registered dramatic falls.
The market uncertainty in share trading worldwide in general and Lisbon in particular has been provoked by a number of factors including the credit crunch, losses sustained by banks and building societies over the sub-prime mortgage crisis, the slowdown in the United States economy, the high price of petrol, soaring food and commodity prices and Portugal’s weak economic performance and growth rates exacerbated by Spain’s construction and housing market slowdown.
Several major financial scandals involving key Portuguese financial institutions such as BPN and BPC and fraud investigations into these and others have also knocked share trader confidence.
So far only Russian and Brazilian stock markets have managed to buck the trend thanks to sky high oil prices and Brazil’s booming economy.
Economist António Seladas believes that a number of negative factors in the past 12 months have created an overall fear and pessimism in the market with TV and press reports further adding wood to the fire.
“Shares reached the limit by which they could be subject to devaluation and still be given as a guarantee to cover loans – their fall in value has put at risk the redemption of these credit loans,” said a stock market source on Tuesday.
Soaring inflation rates, interest rates to control it, reduced consumer spending and poor growth rates are threatening stagflation according to the market analysts.
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