Freefall for Stockholm shares

Shares in Stockholm fell by more than five percent on Monday, but experts were insisting that long-term investors should not sell up.

However, some analysts said that 2006 could turn into a bad year for markets worldwide.

Monday was a black day on the Stockholm exchange. As the market closed, the main OMXS index had fallen by 5.3 percent to 290.6. The more narrowly-based OMXS40 index fell 4.6 percent to 907.4.

The total rise in the market since the start of the year, which at some points has been as high as 14 percent, has now turned into a fall of 3 percent.

Markets in the rest of Europe and Asia also experienced sharp falls.

The turbulence on world markets has now been going on for nearly two weeks. Many shareholders have already sold up and put their money in the bank, and many more have been tempted to do the same.

But Swedish experts in shares and personal finance were advising against such a course of action for long-term savers.

“It is always hard to tell when the market has reached its peak,” said Gunilla Nyström, economist at bank SEB. She added, however, that many small investors should re-evalutate their risk spread, and move investments from high-risk funds to more boradly-based funds with lower risk.

Analysts said the falls could point to a period of increased volatility. Swedbank’s Ronny Jacobsson pointed to the rocky ride for Ericsson shares on Monday.

“Talk about turbulence – tighten your seat belts,” he said.

There were different opinions about the likely developments over the course of the year. Jacobsson said he still expected the OMXS indes to rise by about ten percent over the course of the year. The current downturn simply makes the stock market “more and more attractive,” he said.

Jonas Lindmark at Morning Star disagreed. If the expectations of higher interest rates and weaker dollar that precipitated the falls are shown to have been justified, shares could fall even further.

“A further ten to twenty percent fall is I think quite conceivable, given that there has been such a long and steep rise.”

“There are still plenty with profits to take home. Even if shares fall by ten percent, they will still be selling with real profits,” he said.