SHARES in Cyprus rallied yesterday after the shock of Monday’s global mini-crash, as the US Federal Reserve attempted to plug further losses by slashing interest rates.
The Cyprus Stock Exchange (CSE) put the brakes on after Monday’s 8.4 per cent trough, even though the general index opened four per cent down in the wake of new downturns in overnight Asian markets, spooked by growing fears of a US recession.
The Cyprus market’s General Index eventually finished at 3,709 points, 0.05 per cent down on Monday’s close.
Despite the slow start, the CSE clawed its away back to Monday’s closing level and even spiked to 3,800. However, the move was short-lived and the index dropped back as trading ended.
Yesterday’s volume amounted to €21.5 million, the bulk of which – over €16 million – revolved around banking stocks, which took a severe beating on Monday.
Of the major three, only Bank of Cyprus (BoC) emerged in the black. After shedding €0.86 from its share price on Monday, the bank regained €0.18 yesterday to close at €9.92 after hitting a high of €10.70 and a low of €9.00.
Neither Marfin Popular nor Hellenic Bank rallied to any great extent. Both stocks ended the day in the red. Marfin lost another €0.14 on top of Monday’s €0.74, and Hellenic fell another €0.06, after losing €0.22 the previous day. Marfin closed at €6.22 and Hellenic at €3.56.
Market watchers say small investors are jittery not only because of the US credit crunch, but also because of rising prices due to global oil and wheat hikes, and growing inflation. The general opinion is that Cyprus cannot remain unaffected by events in the US.
Commenting earlier yesterday, Bank of Cyprus CEO Andreas Eliades, who was attending an event at the Cyprus Chamber of Commerce and Industry (KEVE), said: “As you know, I never make comments on stock market prices. However, I must say that I am highly concerned about international developments, especially when they spark off violent reactions (either positive or negative).
“I believe that most Greek banks are well placed in the international conjuncture, not only because they are not exposed to subprime products but also because they have satisfactory liquidity,” he added.
KEVE chairman Manthos Mavromatis said that the main problem was focused on the US market and said any panic was not justified.
“The increase in the price of oil and grain boosts uncertainty and in Cyprus we also have to deal with inflation, which affects competitiveness negatively,” he said.
President Tassos Papadopoulos, who has been promising money left right and centre in his election campaign, commented yesterday on the global financial crisis, saying: “Think what would become of Cyprus now if it were not in the euro zone… a small vulnerable economy, it would have to face alone what other countries such as the US and Japan and other countries are now facing.”
Europe is also bracing itself for the worst, however. The Head of the Eurogroup, Prime Minister of Luxembourg Jean-Claude Junker, said the economic situation in the US was continuing to get worse and a downturn of the economy could not be ruled out.
He was speaking after a meeting of the Eurogroup ministers, which included Cypriot Finance Minister Michalis Sarris.
Junker said that if the US economy did go downhill, it would affect growth rates in eurozone countries. The EU has already revised its growth outlook to below the 2.2 per cent forecast in November.
Sarris said Europe’s reforms would help the EU to face difficulties stemming from the crisis in the US.
He did express concern over global inflation tendencies mainly due to oil and grain prices, as well as high growth rates in some countries such as China.
Sarris said greater caution in fiscal policy was needed, and expressed hope that trends would not spark wage and prices increases.
“It would be better to focus in tackling the inflation tendencies at the early stages than solving problems in the future,” Sarris said.
