THE GOVERNMENT intervened to talk up the bourse yesterday in an effort to arrest the slide that has seen 40 per cent shaved off prices since the market hit dizzying highs last November.
Finance Minister Takis Klerides skipped an IMF meeting in Ukraine to reassure edgy investors that the market slump was irrational, but clarified that there was little the government could actually do to curtail market forces.
"The state cannot intervene in the freedom which must govern the market… the government cannot raise prices," he said at a hastily-convened news conference yesterday.
However, he did say that the finance ministry would allow insurance companies greater flexibility to invest more of their managed funds onto the market, and said he would seek better bank repayment terms for indebted investors now exposed to the price correction.
That could slightly ease a liquidity crunch that has seen millions withdrawn from the market to invest in new start-ups trying to capitalise on the jump in prices last year.
With about 50 of them awaiting approval to list their shares on the market, Klerides said the bourse had also contracted private auditors to review financial statements of applicants in the hope that this would speed up the listing process.
The market has plunged by 40 per cent since last November. Various reasons are cited, from investors angry at commercial banks cutting back loans on Central Bank instructions to companies sitting on millions from IPOs and widespread rumours of a bear play by influential players to drag the market down before moving in for the kill.
Klerides carefully avoided any finger-pointing.
"I cannot understand why, when the prospects of the economy and public companies are excellent, investors’ confidence should be so low. It can only be justified by saying that these are inexperienced investors who are not acting wisely."
The Finance Minister said he would have further contacts with Central Bank governor Afxentis Afxentiou on Tuesday to examine ways of shoring up the market. Klerides said authorities would also pursue with the Central Bank the possibility of allowing investor accounts to reoperate at commercial banks.
"It should be at logical levels… this does not mean we are turning on the money taps," he said.
Klerides said insurance companies would now be allowed to invest up to 40 per cent of their premiums on the market, up from a previous limit of 30 per cent.
Better repayment terms for groups of investors who borrowed to get into the market would also be discussed with the Central Bank, and Klerides said that Afxentiou himself had issued such an appeal to commercial banks.
"This would effectively deal with a problem which may already be confronted by certain groups of investors," he said.
There are no firm figures available, but it is estimated that hundreds of people took out bank loans last year to invest on the market. However, there is no indication that banks are calling them in.
A Central Bank announcement earlier this week that it was lifting restrictions previously imposed on commercial banks failed to have an impact on the market.
The Central Bank, which has for long maintained that the bourse cannot be built solely on borrowed money, said that loans could be allowed for individuals using their bank deposits as collateral.
Some traders have shrugged the offer off, and one trader told the Cyprus Mail yesterday that Klerides would use his meeting with Afxentiou on Tuesday morning to press the point home that the Central Bank should loosen its purse strings even further.
"I don’t know how others see it, but as far as I know investors could always get a loan using their deposits as collateral anyway," the trader said. "So in effect the Central Bank statement amounted to nothing."
