By Hamza Hendawi
SHELTERED from recent world market upheavals by its own global insignificance, the Cyprus Stock Exchange urged the government yesterday to do more to encourage new listings on the fledgling bourse.
“Tax and other incentives must be given by the state to encourage new listings and warm up the investment climate,” Dinos Papadopoulos, the bourse’s chairman, told a news conference.
He welcomed a government bill approved by parliament last month to reduce corporate tax by five percentage points for a five-year period, but said the move has removed a “disincentive” rather than giving one. The bill applies only to new floatation.
“The relevant measures approved recently by the House are one step, however small, in the right direction,” he said.
The Cyprus stock market launched operations in March last year, replacing an unofficial, over-the-counter market which had started in 1979. The market’s capitalisation stood at £1.03 billion at the end of last month, with the banking sector accounting for 63.44 per cent of that.
Also last month, the latest period for which figures are available, the total value of transactions amounted to a modest £10.8 million with an average of £514,000 per session.
The market, which is due for complete computerisation by the end of June 1998, emerged unscathed from last month’s turmoil on world bourses, thanks primarily to the absence of foreign players and the size of the bourse which, compared to emerging markets in the immediate region of southern Europe and the Middle East, is extremely small.
“Foreign investments in the CSE (Cyprus Stock Exchange) are still restricted and our economy is, to an extent, closed, at least as far as capital flows are concerned,” Papadopoulos told the news conference, called to present the bourse’s 1996 report.
In a bid to inject life into the market, Papadopoulos said the CSE was lobbying the government to allow offshore companies based on the island to invest in listed companies, something which is banned by present regulations governing the operations of offshore companies.
“These (offshore) companies are allowed to deposit money in Cyprus banks and collect interest. There it is not an issue, so one should not be raised in the case of the CSE,” he said.
Restrictions on foreign investments in listed companies were eased considerably by the Central Bank earlier this year, by raising ownership ceilings. Some restrictions, however, remain in force and they vary from sector to sector.
Papadopoulos’ plea for the government to do more to encourage investment in the infant bourse echoes the sentiments of many investors who complain of the government’s slow pace of reform and the lack of information available to potential small investors on the market’s operations.
State control of interest rates is also cited as a major hurdle to the market developing its own potential together with the limited number of investment products available on the Cyprus market.
