How the rich became richer

By George Psyllides

THE biggest part of £1.7 billion invested in the stock market (CSE) during 1999 and 2000 ended up in the pockets of the rich, according to a Central Bank survey presented yesterday.

Central Bank Governor Afxentis Afxentiou told a news conference that the majority of those who made money from the CSE were old investors (who had bought shares before 1999) from high-income groups.

Afxentiou said 76 per cent of those who made a profit were old investors, many of whom had sold all the shares they owned.

The majority of those old investors who have not sold their shares continue to make a profit even with today’s prices, Afxentiou said.

At the beginning of 1999, the index opened at 90, reaching a staggering 849 by November.

From then on it tumbled continuously, hitting rock bottom – 104 – in September this year.

The Governor conceded there had been a substantial transfer of wealth towards the affluent social groups, which could broaden the inequality gap between classes.

” There was surely a shift of wealth from certain classes to others; it’s a fact, but it’s extent is not easy to determine,”Afxentiou said.

The survey, which was conducted by Cyprus College on behalf of the Central Bank, found that around £1.7 billion had been invested on shares during 1999 and 2000.

Rural households invested almost the same amount of money as urban ones, with old investors putting in much less than new punters.

According to the survey, 77 per cent of the funds invested in the CSE came from peoples’ nest eggs, while the rest – 23 per cent – was made up of bank loans and account overdrafts.

In general, the savings used to invest into the CSE had been earmarked for personal and family needs, which could explain why consumption had not been affected, Afxentiou said.

” Most funds were destined for future family needs, which explains why the CSE collapse has not affected consumption directly,”he said.

Fourty-three per cent of the money had been set aside for emergencies, 24 per cent for family expenses, and 19 per cent for the children’s studies.

A further18 per cent was being saved for building a house, 15 per cent for land acquisition, eight per cent to buy a car, and five per cent for business expansion.

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