US market crash sends shockwaves

US lawmakers debated, haggled and finally defeated an anticipated US$700 billion aid package proposed by the US Treasury on Monday evening.

The Treasury plan was seen by many as a waste of tax payer money, nationalisation of financial institutions, and inflationary.

News of the rejection by the US Congress sent shockwaves through financial markets and the Dow Jones Industrial Average (DJIA), an index of 30 stocks representing the largest American Corporations crashed 777 points (a decline of 7%, and the biggest point drop ever). Monday's crash wiped out over US$1 Trillion of shareholder wealth. The Standard & Poor Index of 500 shares, a broader measure than the DJIA, and the tech heavy NASDAQ Composite both declined by approximately by 9%.

Asian markets reacted to Monday's crash in US markets on Tuesday. Japan's Nikkei index, Taiwan's TSEC - 50, and Australia's All Ordinaries crashed around 4% each, while the Singapore Straits Times Index and Koreas' KOSPI 100 Index lost close to 1%. US lawmakers are continuing negotiations at reviving the proposed rescue plan, and final agreement may be reached as early as Wednesday.

Locally at the CSE, the ASPI shed 43 points (-2.0%) to close at 2,142, whilst the MPI lost 55 points (-2.3%) to close at 2,397. The biggest decliner for the day was Touchwood Investments, which declined 19% to close at Rs 67.50 on the announcement of a 1 for 1 Rights issue at a price of Rs 60.00.

The company which is involved in Forestry Management, plan to raise Rs 534.5 million by issuing new shares totalling 8.9 million, and plans to use the funds for land acquisition to expand its plantations.

Lanka Ventures (LVL) which is a subsidiary of DFCC Bank, disclosed that its appeal against a tax liability amounting to Rs 235 million had been dismissed by the Court of Appeal. LVL which had disclosed the liability a contingency in at accounts saw its share decline to Rs 9.25

Source: First Guardian Equities