FTSE loses billions of pounds within hours

FTSE loses billions of pounds within hours
Billions of pounds have been wiped off the value of Britain's leading companies after losses at HSBC and AIG drove share prices to a six-year low.

By Graham Ruddick and Myra Butterworth
Last Updated: 5:37PM GMT 02 Mar 2009

HSBC Hldgs
The FTSE 100 index of top UK shares dropped after HSBC confirmed a £12.5 billion rights issue.

It fell by 5.3 per cent and below the 3,700 mark for the first time since April 2003, losing investors £47.7 billion.

The sharp decline took the FTSE 100 below the lows experienced last October as UK banks teetered on the edge of collapse and were bailed out by the Government.

It came as analysts expressed concerns about the state of the UK economy, saying the financial crisis could spill over into other industries.

Investors were spooked by HSBC's rights issue after the UK's biggest bank asked for extra cash from shareholders to boost its balance sheet.

The request was made despite HSBC being one of the British banks least affected by the credit crisis.

HSBC's share issue is the biggest ever in Britain, surpassing the £12 billion request by Royal Bank of Scotland last year before it was forced into state support.

HSBC said the rights issue should help its 'ability to deal with the impact of an uncertain economic environment and to respond to unforeseen events'.

The move sent shares in HSBC down almost 19 per cent and also pulled Standard Chartered, which like HSBC conducts a significant amount of business in Asia, down by a similar amount.

Other UK banks also saw their share price tumble, including Royal Bank of Scotland (which closed down 2.6 per cent), Lloyds Banking Group (down 15 per cent) and Barclays (down 6 per cent).

At the same time, one of the world's largest insurers AIG - which was first saved from collapse in September with a package that grew to $150 billion last year - has had to ask for help again after failing to sell enough assets to repay the US.

Simon Denham, managing director of spread-betting company Capital Spreads, said: "The slowly falling indices are dragging ever more of the total economy into the mire and there is a very real possibility of the problem accelerating into an absolute disaster as opposed to a problem mainly constrained to the financial sector at the moment."

The FTSE 100 has not closed below 3,700 since the outbreak of war in Iraq at the end of March 2003. It was at 3,625.83 at the close of play.

David Buik of BGC Partners pointed out that the FTSE 100 is now lower than when Tony Blair won the 1997 general election. "What a waste of a decade that was," he said.

http://www.telegraph.co.uk/finance/newsbysector/epic/hsba/4928648/FTSE-losses-billions-of-pounds-within-hours.html