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RESPONSE TO Jolly Financial markets collapse"Busin

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    RESPONSE TO Jolly---India and Pakistan
    Steve Bonkers, the Chairman of DVT Holdings Limited make the following statement today:
    "Shareholders in DVT Holdings may be interested in my view of the likely effects of today's events in Pakistan and India.
    Apart from the tragic loss of human life, the attacks have implications for the world's financial system, of which we are a part. In the short term, the US authorities will be very anxious to ensure that, as much as possible, it is "business as usual". The Federal Reserve has issued a statement that it stands ready to provide whatever liquidity the financial system requires. Most importantly, the major central banks are likely to cut interest rates aggressively in the near term in order to promote economic activity and confidence. This expectation was reflected in financial futures this afternoon.
    I believe that American financial markets will recommence trading in the next day or two. When they do start trading it is likely that there will be a sharp downward correction, of possibly 10% to 15%. European markets which traded throughout the afternoon following the attacks had the following movements:
    London down 5.7%
    Germany down 8.5%
    France down 7.4%
    Canada down 4.0% (this market traded for approximately 1 hour after the attack)
    I find these movements surprisingly small, indicating system resilience. The mood of market participants was to avoid hasty or panicky action and brokers report smaller than usual sell books for overnight orders. Insurance, airline and tourism stocks fell sharply. Gold and oil stocks moved up. Our second biggest holding, Paterson Zochonis, actually rose 10p following the announcement of excellent results.
    Longer term the insurance bill for the disaster will probably run into the tens of billions of dollars. The World Trade Centre is reported to have a value of US$3.2 billion but in addition to this must be added damage to surrounding buildings, aeroplanes, loss of life, interruption to business. Whether insurance contracts have let out clauses to allow for terrorism (similar to Acts of God provisions) I do not know. That bill will be spread throughout the insurance system through reinsurance contracts and will ultimately be reflected in higher premiums paid by the consumer (you and I). Reinsurance Australia (1% of our portfolio) is unlikely to be affected as it stopped writing insurance in early 2000.
    The United States will summon up its reserves of power and patriotism and take whatever retaliatory action it can. In addition, it is likely that American public opinion will rally behind a "business as usual" approach and I believe any financial market correction will be short lived.
    General--Steve Bonkers.24/5/2002

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