ICELAND'S benchmark stock index plunged 77%, the biggest decline on record, as trading resumed after a three-day suspension and the nationalisation of the country's largest banks.Investors demanded a higher premium to hold Icelandic government bonds, while the price of the country's currency remained "undetermined", according to TD Securities.The global financial crisis sparked the collapse this month of Kaupthing Bank, Glitnir Bank and Landsbanki Islands with debts equivalent to 12 times the size of Iceland's economy. The three banks accounted for about 76% of the OMX Iceland 15 Index's value prior to the nationalisation."Given that we don't have a normally functioning exchange-rate market, a fixed-income market, we don't have a clearing system between the banks internally, it's hard to talk about any well-functioning stockmarket," said Lars Christensen, a senior strategist at Danske Bank in Copenhagen.The OMX Iceland 15 fell 2326.22 points to 678.40, the lowest since April 1996. The gauge has lost 89% this year. Four of the 13 other stocks in the index did not trade, while the six that did accounted for about 8.5% of the measure's weighting before yesterday.Iceland's decline came as the US plan to inject $US250 billion ($A354 billion) in banks helped send Europe's Dow Jones Stoxx 600 Index to its biggest two-day gain on record. The regional benchmark added 3%.
Trading in Icelandic stocks had been halted since October 9 after the OMX Iceland 15 lost 30% in nine days as the country's financial system collapsed.There was no trading yesterday in Iceland's krona by foreign banks and the price of the currency remained undetermined.The OMX Nordic Exchange set the prices of the three nationalised banks to zero in the index after "not being able to receive valuations from market participants".