The Royal Gazette / Bermuda Stock Exchange Index lost almost a third of its value in 2008 — one of its worst ever years — as major local companies struggled during the global economic downturn.

The BSX Index closed the year at 3,417, down 1,492.9 points (30.4 percent) from its 2007 close of 4,909.92. Most of the losses could be attributed to the decline in value of the BSX's most heavily traded stock, Butterfield Bank.

Butterfield's share price plunged 37 percent during 2008, as the company suffered from the decline in value of investments linked to sub-prime mortgages and spent tens of millions of dollars supporting its Money Market Fund as the credit crunch wreaked global havoc.

Of the total market valuation of the BSX of $1.67 billion, Butterfield makes up about $972 million.

The BSX was not alone in suffering a crash, as the S&P 500 Index in the US plunged by 38.5 percent in 2008, while London's FTSE 100 fell 31 percent. Markets across Europe and Asia also plummeted.

Taking the longer term view, even after the dismal past 12 months, the Index has more than doubled in value since the start of this decade — it opened on January 1, 2000 at 1,504 points. Investors who reinvested their dividend payments over those years would have enjoyed even higher returns.

BSX president and chief executive officer Greg Wojciechowski said: "The global economic downturn is impacting Bermuda in all sectors. That's to be expected, because of Bermuda's interrelationships with the rest of the world.

"We should be concerned and vigilant, but we should also remember that this is a deep, deep correction and dislocation and out of that comes opportunities."

Although the BSX's decline was steep, it was a lesser fall than was seen in most other stock indexes around the world. Mr. Wojciechowski said that was a testament to investors' commitment and their appreciation of the intrinsic value of local companies.

He added that living in a small community gave Bermudian investors the opportunity to have a more thorough knowledge of the companies and people to whom they were entrusting their money, than would be typical of investors in larger countries.

"We use domestic companies' products and we know the management, we see them in the grocery store," Mr. Wojciechowski said. "We are all rowing the same boat. Everybody wants to see the companies succeed because the companies are supporting the community." Bermuda Aviation Services Ltd. was one of few BSX-listed winners in 2008. The diversified company, whose main business is cargo handling at the airport, rose 4.9 percent during the 12 months to close on $6.40.

Insurer and pension Argus Group Holdings Ltd. plunged 36 percent, with most of the damage done in the last quarter of the year. The company's stock price stood at $13.70 on October 1, but by the close of trading on Wednesday, it was down at $9.75.

The good news of Argus' improved operating results was somewhat overshadowed by the decline in value of the company's significant stake in Butterfield Bank and the slight exposure of some of its pension funds to Bernard Madoff's alleged Ponzi scheme.

Other major players in local business also saw tens of millions of dollars wiped off their market capitalisation during 2008.

Telecommunications firm KeyTech Ltd., the owner of the Bermuda Telephone Company, plunged by nearly 27 percent, dragging its market value down to $94.3 million. Energy company Belco Holdings Ltd. fell 14 percent to close the year on $18, giving the company a market valuation of $184.6 million.

Mr. Wojciechowski said 2008 had been a "bittersweet year" for the BSX. While the Index had plunged dramatically, the Exchange had continued to build up its international stature by being granted membership of the America's Central Securities Depositories Association in February. In August, the BSX also joined the European Securitisation Forum.

Historically, steep falls in stock markets have created opportunities for investors to buy shares on the cheap, but successful investments depend on the companies investors pick.

"The opportunities are only as good as the research you do," Mr. Wojciechowski said. Investors should weigh the fundamentals of a company, consult experts and appreciate the level of their own risk tolerance before buying, he suggested.

The BSX, which began life in 1971, is today the world's largest offshore, fully electronic securities market.