Venezuela stock market in free fall

Venezuela’s financial markets tumbled after President Hugo Chavez promised to nationalise the biggest phone and power companies. The Caracas Stock Exchange closed nearly 19% down, with bonds also lower, amid fears that the meltdown, also felt in Turkey and Thailand may spread to other emerging markets.

Telecoms firm CA Nacional Telefonos (CANTV) was suspended from trading after closing 30% lower, while power firm Electricidad de Caracas fell 20%.

While Chavez had outlined some of his plans, analysts said he had decided to go further than previously thought.

Chavez’s announcement drew criticism from the US.

“Nationalisation has a long and inglorious history of failure around the world,” said White House spokesman Tony Snow.

“If any US companies are affected, we would expect them to be promptly and fairly compensated,” said Gordon Johndroe, spokesman for the White House National Security Council.

The US state department said it expected Venezuela “to follow through on all of its contractual obligations”.

Foreign investors were shaken by the news, and shares were hit in Mexico where the main stock index lost 2% because a number of companies have close business links with Venezuela.