October has been, as a rule, a good time for the Bulgarian Stock Exchange (BSE) - optimistic investors returning from their summer holidays pushing stock indices ever higher. In October 2006, the blue-chip Sofix index charged past the 1000-points marker and a year later, when the full impact of the US mortgage crisis was yet to be fully felt, it was within touching distance of 2000 points. Until this year.

Over the first six trading days of October 2008, the Sofix, which tracks the 20 most-liquid stocks on BSE, lost a quarter of its value and fell under 600 points for the first time in nearly four years in intra-day trading on October 8. Daily drops of more than 10 per cent have become a routine occurrence, with banks leading the downhill stampede, mirroring similar developments on the world's biggest markets. Market capitalisation has shrunk from 29.1 billion leva at end-October 2007 to 14.1 billion at the end of the day on October 8, according to BSE data.

In the same way bail-out plans for large lenders in the US and across Europe have failed to spark lasting stock rallies across the globe, BSE has shrugged off the re-assurances of Finance Minister Plamen Oresharski, central banker Ivan Iskrov and macroeconomists about the smaller risks that the global financial crisis carries for Bulgaria.

The reason is that much of the BSE's growth in recent years has been fuelled by the cash injections of foreign investors, the bulk of whom have already exited the market, which, in turn, has limited the already low liquidity even further on BSE.

Yet on October 8, the turnover jumped to almost triple the average daily figure, prompting brokers to talk about panic setting in on the market. "Complete domination of panic sell-offs [...] and we don't have reasons to think that the market has reached the bottom," Nadia Nedelcheva, financial analyst with local brokerage Karoll, told SeeNews corporate wire.

Severin Vurtigov, portfolio manager at Benchmark Asset Management, quoted by Dnevnik daily, said: "Given the low activity of institutional investors and the difficult situation on international capital markets, it is nearly impossible to make an accurate prediction about where indices will bottom out."

"The fear is still too strong," Ivan Ivanov from asset manager Status Capital told SeeNews. "The sell-offs are like a flight, some of the investors are exiting positions, taking into consideration neither the [stock] fundamentals, nor the outlook."

The Sofix has lost 70 per cent since hitting 1981.8 points in intra-day trading on October 8 2007 and the broader BG40 has lost 75 per cent over the same period, but recent drops have made some investors sit up and take notice, with insurers among the active buyers, as a poll by investor.bg website showed.

"We are now buyers on some positions that we believe to be attractive, observing the limits set out in our investment strategy," the head of the asset management department at Allianz Bulgaria, Boris Bonkin, said. "We are long-term investors with a horizon of at least five years, so the leading factors for us are the fundamentals of a company. There are definitiely attractive stocks right now that have lost even more of their value because of low liquidity and are now trading at a good discount."