Asian, a European markets recovered

Asian and European markets recovered Wednesday to record gains on news that the Federal Reserve Bank of the US had given a US$ 85 billion bail out loan to the American Insurance Group and acquired 80% of the company.

Earlier this month, the Fed took over the housing mortgage guarantee companies Federal National Mortgage Association and Federal Home Loan Mortgage Corporation better known as Fannie Mae and Freddie Mac respectively.

It previously guaranteed the assets of failed investment bank Bear Stearns & Co, enabling JP Morgan to purchase the investment bank. While the Federal Reserve intervenes in the financial markets to prevent further fallout, many American homeowners continue to lose their houses due to foreclosures and low access to capital markets. The CSE moved in the opposite direction with the ASPI losing a massive 41 points (-1.8%) to close at 2,280, while the MPI lost 51 points (-2.0%) to close at 2,582. The ASPI has crossed the psychological barrier of 2315 points indicating that it will go down even further.

The cause for the large drop was Dialog Telekom, which closed the day at Rs 10.25, John Keells Holdings at Rs 83.25 and Distilleries Rs 72.75. Dialog is still the largest listed company, but its market capitalisation has dropped to Rs 83 billion (11% of total market capitalization). The second largest company is Sri Lanka Telecom at Rs 78 billion, accounting for 10% of market cap. Market turnover for the day was Rs 304 million with transactions in AMW accounting for Rs 125 million.