A NCIIAL MII ROR THIISS WEEK
A mystery seller of Laiki shares rocked the stock market with the CSE dropping to a 8-year low, with the only good news of the week coming from a report that foreign direct investments were up 35% in 2003, the Financial Mirror reported in issue 588, on September 29, 2004.
A mystery sell order of up to 1.9 mln Laiki Bank (CVPB) shares rocked market sentiment on the CSE, as the index attempted to stabilise but dropped to an 8-year low. The placement of such a huge sell to 4.3% and the fiscal deficit as a percentage of GDP set to come down to 3%. Improvement was also recorded in three key areas noted by the IMF in the previous year’s report: recovery of competitiveness through wage moderation, fiscal consideration and structural reform, primarily in the finance sector. The IMF also agreed with government forecasts that the growth rate will accelerate, inflation will decline and the current account will remain broadly in balance. Delays were noted in restoring investments, more liberal trade policy, free interest rates determined by market forces. The IMF report was also frank in saying that in order to allow a recovery of profit margins and improvement in competitiveness, which in turn will help increase investments that are at a historical low and the stock order in multiple lots from CYP 1.25 to 1.30 for about 1.5 mln shares added to jittery nerves amid fears that a major shareholder is attempting to settle scores with the bank through the Exchange, by driving the share price lower. Brokers pointed the finger at Universal Life that has been in conflict with the bank for quite a while, despite a fresh thaw of in relations in the run-up to a possible sale of Laiki’s stake in UL to the Eureko Group, a deal that will not be concluded after all.
Foreign direct investment slows into Cyprus increased by 35% to USD 830 mln in 2003, from USD 614 mln in 2002, according to the UNCTAD annual World Investment Report. Cyprus ranked 24th in rankings, while outward FDI flows from Cyprus rose to USD 345 mln in 2003 from USD 299 in 2002.
The projected budget deficit for 2004 is seen at 5.2% of GDP and even lower according to Finance Minister Makis Keravnos, if the revenue raising measures generate the desired results, but no firm decision ha been taken when Cyprus will apply to join the ERM II. The government is hoping to bring the fiscal deficit down by several points in 2005 to a target of 2.9%, just below the 3% maximum ceiling set by the EU in order to be eligible to join the single currency mechanism and then adopt the euro.
In two separate articles, economists were debating subjects that are all too familiar nowadays: Dr Stelios Platis was writing about “Banking Sector: The need for better (risk management) practices”, while Dr Jim Leontiades of the CIIM Business School was arguing about “Austerity (Cypriot style)”. (Ed’s Note: Too bad these opinions fell on deaf ears, as usual) market unattractive, in the next few years real wage growth will have to be lower than the productivity growth and swift amendments should be brought to the COLA wage indexation system. The report concluded that Cyprus has to take the painful measures required to stay competitive and prosper in the future. There is no turning back. (Ed’s Note: Ahh, if only our politicians of 20 years ago had the courage, we would not be in the mess we are today…)
Cyprus Popular Bank (Laiki) took the lead as the most profitable bank in the first six months of the year, with operating profits up 15% to CYP 13.92 mln, with Bank of Cyprus up 12.3% to CYP 13.05 mln and Hellenic up 14.3% to CYP 2.3 mln.
The recent strikes by Cyprus Airways staff on the ground and in the air has cost the airline “tens of thousands of pounds”, while other estimates put it at CYP 200,000.