Market upheaval wipes out billions in Finnish wealth

Shares and mutual fund holdings lose value in world financial crisis

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The upheaval on world financial markets has had a devastating effect on the wealth that Finns own on paper.
      More than EUR 14 billion has disappeared from the value of shares quoted on the Helsinki Stock Exchange. Domestic investments on the exchange account for more than 40 per cent of the value of the bourse, which means that EUR 5-6 billion in stock market value of Finnish shareholders has disappeared. Losses to Finnish households are believed to total about EUR 2 billion.
      As for holdings of Finnish households in mutual funds, between EUR 200-300 billion has been lost in the past week.
     
The greatest losses have been suffered by funds investing in banks and in Russia, according to an investigation conducted by the brokerage house Eufex on behalf of Helsingin Sanomat.
      The result is hardly surprising, as banking shares in the United States have been in a virtual free fall in recent days. Share prices in Russia have also fallen so fast that trade on the stock market has been suspended a couple of times.
     
The financial newspaper Taloussanomat wrote on Thursday that the mutual fund company Sieglison & Co has shut down its fund that invests in Russia for the time being, because it is not possible to get reliable quotations now that the Moscow Stock Exchange is closed.
      Mutual funds investments in Finland have survived the upheaval better than those in many other countries. By Wednesday there was an average 3.4 per cent fall from Friday last week, while the general index of the bourse declined by more than six per cent. On Thursday there was a further 1.6 per cent decline.
     
Uncertainty has increased the concerns of mutual funds investors, but there has been no mass exodus from the funds in recent days, says Kalle Saariaho, CEO of Alfred Berg Asset Management. “Naturally, people are concerned.”
      More than half of the cash holdings of Finnish households are still in bank deposits, even though the banks have encouraged Finns to invest in shares, and above all in mutual funds.
     
As interest rates go up, the popularity of bank deposits has increased in recent times, especially as banks which find themselves in a competitive situation have begun to offer better interest rates for fixed-term deposits.
      The flow from interest funds to bank deposits reached a peak in the first half of this year, and the events of recent days have not accelerated the trend, says Jari Kivihuhta, director of Nordea mutual fund company.
      There has also been little movement in stock market and combined funds. “To a large extent we are in a situation in which people are waiting and seeing.”


Previously in HS International Edition:
  Wall Street woes send Helsinki stocks tumbling in Wednesday afternoon trading (18.9.2008)
  Stocks in Helsinki come under pressure but recover in late Tuesday trading (17.9.2008)

Helsingin Sanomat