When stocks move, the econ­omy will move

E DII TO RII A L

Financial Mirror (Cyprus) - - FRONT PAGE -

The gen­eral rule is that what drives a healthy stock mar­ket is the vol­ume in shares traded and not the share prices or the gen­eral in­dex. This was proven all too true since March last year after Laiki Popular (CPB) was wiped off the face of the Cyprus bourse and Bank of Cyprus (BOCY) was sus­pended, in­def­i­nitely, de­priv­ing the CSE of 80% of its turnover.

Since then, we have seen stock trades reach the bot­tom of the pit, with vol­umes drop­ping or fall­ing be­low CSE lev­els of ten years ago and even two decades ago when the Ex­change was re­born as a proper in­sti­tu­tion, hav­ing been an OTC mar­ket un­der the KEVE Cham­ber man­age­ment.

What is in­ter­est­ing is that in more than a year and a half, we have just had the first week where vol­ume picked up to a steady daily av­er­age of around 200,000 euros, still piti­ful, yet an in­di­ca­tion that in­vestor in­ter­est is pick­ing up.

Sup­pos­edly a gauge of the econ­omy, the con­fi­dence in the CSE is also boosted by an im­prove­ment in fis­cal eco­nomics and the Troika of in­ter­na­tional lenders promis­ing to give us some 453 mln euros more from our bailout purse, see­ing as we fi­nally (yawn, yawn) voted through the fore­clo­sures bill.

The CSE it­self will never re­cover un­til BOCY starts trad­ing on the board again, which ex­perts place at a cap of 24c, the pri­vate place­ment price of­fered to in­sti­tu­tions, but for the time be­ing ex­pected to trade at far be­low that at open­ing. There will be pres­sure from fund man­agers and cash-strapped re­tail in­vestors to off­load their hold­ings and cash-in their losses, with fewer hun­gry and cash-rich in­vestors sit­ting on the side­lines wait­ing for bar­gains to buy.

The CSE and the watch­dog CySEC have been too slow and too late to pick up on trends and nov­el­ties, un­de­cided on prod­ucts and ser­vices, while drag­ging their feet on in­tro­duc­ing new reg­u­la­tions that would her­ald in new play­ers, new list­ings, IPOs and prod­ucts such as de­riv­a­tives, mu­tual funds, etc.

Cyprus has a unique op­por­tu­nity to list and price com­modi­ties, rang­ing from the tra­di­tional farm fu­tures to new prod­ucts such as shipping cargo con­tracts or even high-tech items such as Forex funds, vir­tual cur­ren­cies and oth­ers, that will pass us by and be picked up by other ju­ris­dic­tions if we don’t move fast.

Talk of Cyprus at­tract­ing Is­lamic bank­ing or sukkuk funds are a bit far-fetched, as no man­ager in his right mind would list such a prod­uct in a slow­mov­ing mar­ket, with third-world vol­umes.

The sooner the pri­mary bank­ing stock re­sumes trad­ing and we at­tract other list­ings, the faster money will start flow­ing back into the mar­ket, in­vestors will pick up or sell stocks and com­pa­nies will re­sort to IPOs to raise cash, due to the ab­sence of any real fund­ing from the banks.

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