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Cyprus: Country and Foreign Investment

Stock Exchange

The Stock Exchange began operations only in March 1996; it is governed by a Stock Exchange Council. It is fair to say that it has undergone a rollercoaster ride since then. Reaching a high of 11,443 points in November 1999, the index collapsed to a low of 938 in October 2004. Worse was to follow.

In 2006-7, the Cypriot stock exchange went into another gigantic bubble. The index went up from around 1,000 points to a high of 5,518. Then, at the start of the Great Recession in 2008, another thunderous crash occurred; by March 2009, the index had fallen all the way back to 691. Then, after a brief resurge, the index started falling again, and then came the Cypriot crash in 2012. In 2013, the index settled around the 100 mark for two years. Then there was a further fall to around 65, though in the last two months, the index has risen slightly to around 75 points.

In March 2002 a co-operation agreement was announced between the Cyprus Stock Exchange (CSE) and the Athens Stock Exchange (ASE), which included provision for the setting up of a Cyprus derivatives market. In May 2003, the CSE announced its participation in the FTSE Med 100 Index which was officially launched in June of that year. It consisted of 100 stocks from the Athens, Tel Aviv and Cyprus stock exchanges (weighted 56.55%, 42.55% and 0.89% respectively). Initially, five Cypriot firms made up the country's representation on the exchange, and the CSE had a guarantee that the number of Cyprus stocks would not fall below this level. The companies represented were Bank of Cyprus, Laiki Bank, Hellenic Bank, Louis Cruise Lines and Tsokkos Hotels.

The Government has toyed with various schemes meant to underpin the market, and litigation rumbles on in the courts over compensation for investors caught out when the market crashed, but it's probably still too soon to imagine that the party will start all over again, given the attractions of the real estate market. Alongside its trading problems, and partly as a result of them, the CSE also has major structural and governance problems, with incessant disagreements between stockbrokers, investors' representatives, the government and the CSE itself.

In June, 2004, the CSE announced a package of new measures that it hoped would revive the fortunes of the institution by bringing it into line with internationally accepted practices and European Union Directives. Under the plan, the bourse split into three separate markets in 2005: the Main, Parallel and Alternative markets; in addition, there are separate markets for government and corporate bonds and mutual funds.

In May, 2006, the CSE and the Athens Stock Exchange (ASE) began the testing of a new common trading platform.

At the end of June 2007, market capitalisation of shares (excluding Investment Companies Market) reached €19.49 billion. In February 2010, total capitalisation across all markets was given as just under €6.3bn.

In June 2009 the CSE was designated by the UK's tax authority, HM Revenue and Customs, as a recognised stock exchange. Securities admitted to trading and listed on the EU regulated markets of the Cyprus Stock Exchange (those regulated under Title III of the Markets in Financial Instruments Directive (MiFID) will meet the HMRC interpretation of ‘listed’ as set out in sections 1005.3a and b, Income Tax Act 2007 for tax purposes.

The CSE has been expanding its product offering in recent months, with the launch of the Emerging Companies Market in March 2010, and the start of over-the-counter transactions in July that year. The Emerging Companies Market, or NEA, began trading with the listing of four companies, including Executive S.A., Phone Marketing S.A., Cyprus Limni Resorts and Golfcourses plc and Constantinou Bros Asset Management plc.

In July 2010, CSE Chairman George Koufaris told a press conference that the exchange would continue to play a central role in the development of Cyprus as a financial centre, announcing at the same time that the bourse was working on new initiatives to "become a more dynamic and competitive market" in regional terms.

The combined profits of all companies listed on the Cyprus Stock Exchange (CSE) fell by €249m or 39% to €388.73m in 2009 (2008: €637.74m), according to data compiled by the Financial Mirror.

In cooperation with the European Central Bank (ECB), the Cyprus Stock Exchange is in the process of implementing the T2S project in Cyprus. This is an ECB initiative starting from 2014; it includes the introduction of a technical single service, which will serve the settlement of both cross-border and domestic transactions in Central Bank money. Euro area depositories, plus depositories of European countries outside the euro area will participate in the service with the support of their Central Bank and will cover all dematerialized securities: shares, bonds, etc, giving access for the settlement of clearing instructions against any currency available.

The CSE signed the Memorandum of Understanding (signed by 30 Depositories) in July 2008, which mostly covers the preparation and negotiation of the compatible arrangements that cover the development and the operation of the project.

 

 

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