DAX freefalls to multi-yr low, lawsuit hits Bayer
(Reuters 03/12 09:34:07)
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By Jess Smee
FRANKFURT, March 12 (Reuters) - News of a U.S. lawsuit
crippled Bayer <BAYG.DE> shares on Wednesday afternoon as
Siemens <SIEGn.DE> and E.ON <EONG.DE> helped wipe five percent
off the German DAX, knocking it to its lowest level since 1995.
Siemens' 4.8 percent fall and E.ON's 7.4 percent fall led a
broad-based blue-chip slump and elbowed the DAX <.GDAXI> below
key psychological support at 2,200 points.
"The 70 percent drop in equity prices since March 7, 2000
now threatens to take on historic proportions," Merrill Lynch
said in a recent research report
"Should the DAX dip below 2,200 points, we calculate this
bear market would then exceed that of the 1930s."
The DAX index traded off 4.8 percent by 1720 GMT at 2,195
points, having earlier slumped as low as 2,189 -- its lowest
level since November 28, 1995.
The German equity market peaked three years ago at an
intra-day level of 8,136.16 and since then it has shed some 700
billion euros, almost twice the annual GDP of the Netherlands.
Leading the fallers, Bayer lost almost ten percent after it
said it was being sued by U.S. shareholders over allegations
that it violated the Securities Exchange Act.
"Bayer has taken a sharp downturn on this lawsuits story. It
looks bad for the stock and adds to existing concern with all
the Baycol stories," a fund manager in Germany said.
Bayer said the suit alleged that it covered up information
about withdrawn anti-cholesterol drug Baycol, which has been
linked to more than 100 deaths.
Bayer stock has almost halved in value so far this year amid
worries about the potential costs of the ongoing legal saga. It
already faces claims for damages from Baycol patients that
analysts believe will run into billions of dollars.
TUI, LUFTHANSA SHINE
Among just seven stocks bucking the market gloom, Lufthansa
raced six percent higher, after a company presentation renewed
interest in the stock's low valuation.
"The company gave a presentation yesterday which was quite
impressive. The CFO said the market capitalisation was equal to
liquidity and you would more or less get the whole business for
free if you bought the company as a whole," said Christian
Gombert, fund manager at Deka Group.
"I would say there is a big undervaluation of Lufthansa
based on fears of terrorist attacks and a possible Iraq war."
Shares in travel group TUI <TUIG.DE> also outperformed after
a seven-day slide that has taken more than 17 percent off its
share value amid fears of a slump in bookings as people postpone
holidays.
Among DAX victims, Munich Re <MUVGn.DE> and Allianz
<ALVG.DE> both lost almost eight percent, extending their
respective slides of more than 40 percent since the start of the
year, as investors fret about their exposure to the slumping
German equities market.
Allianz earlier denied market talk it was planning to sell
its stake in chemicals BASF <BASF.DE> but the speculation
renewed uncertainty about Allianz's possible needs to raise
capital.
Allianz has in the past vigorously denied that it was going
to make a rights issue, but investor anxiety is creeping higher
ahead of its annual results next week.
IRAQ AND ECONOMIC BLUES
Market players said uncertainty over Iraq and the sluggish
economy continued to cast a long shadow over the German DAX,
prompting investors to sell borrowed shares in the hope of
buying them back for less -- so-called short-selling.
"A lot of investors are speculating on this market falling,
just like lots of people bet on it rising further in March 2000
but the chances are that people will get burnt," said Invesco
Asset Management fund manager Michael Fraikin.
"I think the market is overdoing it on the downside at the
moment."
The DAX Volatility index <.VDAX>, the so-called DAX "fear
barometer," surged as much as 4.78 percent, hitting its highest
level since January 31, as investors rushed to derivatives to
hedge their exposure to equities in tumbling markets.
((Reporting by Jess Smee and Marius Bosch,
frankfurt.newsroom@reuters.com, Reuters Messaging:
jess.smee.reuters.com@reuters.net, +49 69 7565 1270))
REUTERS
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