The Neuer Markt is going through one of the worst phases in its history, and recovery looks frustratingly elusive.

The tally for the past few weeks is: two planned IPOs on the market have been shelved; the German securities watchdog has started investigations into share price movements of half-a-dozen Neuer Markt-listed companies, including online retailer Letsbuyit.com; two more companies have slid towards insolvency; and the market's indices hit record lows last Friday.

With more bad news in the pipeline and the market's former bright image as Europe's leading growth market badly tarnished, some of the remaining top companies are considering an exit to re-list elsewhere, bankers and analysts say.

A desertion by one of the dozen or so foremost companies in the Nemax 50 index would do severe damage to the market's credibility.

In the meantime, the list of smaller companies sliding into trouble is lengthening, which does not help the market pick itself up and dust itself off.

Multimedia agency Kabel New Media, which filed for insolvency last week, was one of the better known of the dozen Neuer Markt companies to have filed for insolvency so far, but it will not be the last.

"This has only been the beginning of the end; many more companies will disappear," says Markus Straub of the SdK shareholders' association.

"About 50 of the companies currently listed could vanish in the next year, and about half of those listed today could be gone in the next three to four years, either because of mergers or insolvencies," he believes.

Analysts agree that many companies that listed during the boom time did so either before they were ready to float or should not have listed in the first place.

Although the Neuer Markt's frailty is partly due to its dependence on the Nasdaq, its big brother in the US, and the slowdown in global economic growth, a shake-out at home is also desperately needed to help the patient regain strength.

"A move upward won't come before the flood of scandals and insolvencies slows down.

"So far, that is not in sight, particularly with profit warnings such as that from Marconi keeping sentiment down," says Michael Bahlmann, technology analyst at MM Warburg.

"In the present mood, we see a lot of reasonable companies being sold off aggressively at even the remotest hint of poor news."

The low prices and thin liquidity of a large proportion of shares pose a further problem.

Of the 343 companies on the Neuer Markt, only about a quarter are trading above their issue price, about 40 are trading below €1 and roughly 160 are below €5.

Not only are such "penny stocks" susceptible to manipulation, but also unattractive for fund managers.

The Deutsche Borse has been considering rules allowing it to eject stocks if they persistently trade below a certain level, but is saying nothing concrete so far.

Fund managers would welcome such a move, but Mr Straub argues it would simply push stocks on to a different segment, and not help the investor.

Moreover, the Borse would see strong opposition from the listed companies, he says.

"They have made progress at working out the regulatory kinks," says Richard Leggett, pan-European technology analyst at Goldman Sachs.

"But the bottom line is the performance of the market's companies.

" It took years for the Nasdaq to reach the stage where they had a handful of companies that gave it credibility."

Given the flow of poor publicity attached to the market, and desperately low IPO volumes, such a "quality stable" of stocks will be hard to establish.

"It will be a long road back to investor confidence," says Mr Leggett.