Volatility in Icelandic markets in wake of Fitch's revised outlook Skip to content

Volatility in Icelandic markets in wake of Fitch’s revised outlook

The Icelandic stock market fell across the board yesterday and today in the wake of Fitch’s revised outlook for Iceland. The Icelandic króna, ISK, fell, too.

At noon today, Wednesday, the króna-index was at approximately 113, up from 106 since Monday. The Icelandic Stock Exchange, ICEX-Main, was down to 5,900 from about 6,200 Monday.

Public reaction was mixed.

According to news station NFS, yesterday prime minister Halldór Ásgrímsson said plans for additional heavy industry projects were “uncertain” in the wake of the Fitch outlook. He denied the government had made any mistakes in economic policy.

Today, both the prime minister and the finance minister referred all questions concerning the revised Fitch outlook to the banks.

Yesterday, Edda Rós Karlsdóttir, head of the research department of Landsbanki, called the Fitch outlook “unusually critical”.

Edda Rós also served on the board of the state power company, Landsvirkjun, when it decided to build the controversial dam at Kárahjúkar. The economic overheating of the past several years has been attributed in part to the construction of the Kárahnjúkar dam and the aluminum smelter it supplies at Reydarfjördur. As director of Landsvirkjun, Edda Rós voted in favor of Kárahjúkar when it was approved by Landsvirkjun’s board in January, 2003.

According to Morgunbladid, Bjarni Ármansson, CEO of Íslandsbanki, said yesterday at the bank’s annual general meeting that the revision did “not improve the bank’s financing prospects”.

In an interview with the Icelandic National Broadcasting System, RÚV, this morning, Thordur Fridjonsson, CEO of the Icelandic Stock Exchange, called the market reaction “excessive”.

Morgunbladid reported on the coverage of the Danish daily Berlingske Tidende. According to Morgunbladid, Lars Olsen of the Berlingske said that Icelandic credit in international markets would soon be “exhausted”. According to Olsen, the domestic growth was “too fast” and there was “too much borrowing to finance acquisitions abroad”.

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