REMEMBER 1999? Luxury cars were in high demand, stockbrokers were the epitome of cool and investors had to fight and kick their way through the crowds to look at the numbers flashing on the blue screens.
As long as those numbers went up nobody minded, but five years on the Cyprus Stock Exchange, ostensibly the mirror of the economy, representing 35 per cent of gross domestic product, looks like one bottomless pit.
Want one good reason to invest? Um… dividends offered by certain companies are higher than one would have received on bank deposits and some companies have attractive price to earnings ratios of 11 times and lower. Its’ also possible to make a profit — and a loss — if you speculate by picking on penny stocks which move in the fractions, but that entails serious commitment and nothing better to do.
Reasons not to invest? Confidence. There is none. Thousands were left out of pocket by the crash in 2000 and an ongoing probe into the “scandal” doesn’t appear to help.
Results of the investigation are expected in August, but nobody is holding their breath since it is unlikely anyone will be locked away for either milking unsuspecting investors of their life savings or using their position of authority for personal gain.
Add the ever-more distant prospects of a Cyprus settlement and a couple of investigations into alleged irregular accounting practices and the future looks grim.
Humbled and humiliated, the Stock Exchange is now a shadow of a past self that brimmed with exuberance and greed.
Policemen question people walking into the dimly lit bourse headquarters at a former shopping centre on the outskirts of Nicosia — ironically itself a symbol of a grandiose business plan which badly went awry.
The market, which trades in shares of 152 companies, broke two year-lows in sucession last week. Closing on Friday at 75.81 points, it is barely two points higher than the all-time trough of March 1997. Turnover barely exceeded £250,000.
Such are the present distortions on the market that moving in fractions of a cent can put you in the net gainers’ league. On Friday, three companies — Pandora, Tsokkos and Atteshlis Shipping, were among the top 10 companies to make net gains. The stock of each is trading at less than 10 cents.
Stockbrokers have lost their swagger. >From close to 30 offices established in the market’s heyday in 1999, there are barely 15 left, and they are struggling.
“I think it is finished. Believe me, I have held on as much as I can but we can’t survive like this. The market is dead,” said one broker who spoke on condition of anonymity.
The broker, who has more than 10 years experience on the market with a large share of transactions, said their office could barely make ends meet. “I made £300 today, I am making nothing. I think the only ones who can survive are the bank-affiliated brokerages.
“It’s a cursed career.”
Bourse authorities want to start on a clean slate. CSE chairman Akis Cleanthous has appealed for backing from parliament and government to expedite approval of legislation which would replace the present system with a three-tier bourse where companies would be categorised on profits, transparency and free float levels.
“It should be the driving force of the Cypriot economy. People must understand that this market is not the market that existed four or five years ago,” Cleanthous told journalists.
Brokers’ only half share his enthusiasm. Investors may switch off. “I think it is a waste of money and resources. It won’t help,” said independent broker Evros Constantinou.
Others say the need to shore up the market by creating a “premier league” of companies should make the market more reputable and visible — a quality now sorely lacking.
The main market will be reserved for blue chips which follow corporate governance rules, a nine million pound market cap and a 25 percent free float. The second category of alternative stocks will allow a smaller spread of 20 percent on the market and a four million pound cap. The rest of them will be put into the alternative shares category, which is the bottom of the pile.
“Its a bit like playing football in the Premier League. This will certainly give companies more incentive to do better,” said Stavros Agrotis, vice chairman of the Stockbrokers’ Association.
“It is a step in the right direction, it would make the market more visible and put more emphasis on the better companies,” he said.
GHOSTS PAST AND PRESENT
Part of the problem is that people’s confidence in the bourse has been irreparably dented and that is likely to be felt for some years to come. “I would stress that irreparably bit,” said independent broker Evros Constantinou, who recently wound down the operations of one brokerage in Nicosia.
“When I was going through the clients’ accounts their ages were between 28 and 60. that’s a whole generation. I don’t think there were many people who made any gains unless they did something wrong, so if you have a whole generation who lost you will have to wait for the next one to come along,” he told the Sunday Mail.
Another broker said the Greek Cypriot rejection of the United Nations reunification plan had a “tremendous” impact on sentiment. “There really isn’t anything to look forward to. The market had been showing some gains early in the year on heightened prospects of a deal, what is there to look forward to now?”
Regardless of the bust, the CSE’s likely lifespan is limited because of its small size, said Constantinou, who says he expects a common trading platform with the Greek bourse at some point in time. “Cyprus is a small market. Small markets do not survive these days.”
