Merger activity boosts Cyprus stocks in 1Q

Intense merger and takeover activity helped Cyprus stocks maintain robust gains during the first quarter, with prospects boding well for the remainder of the year as the pace of M&As shows no signs of slowing down.

The CSE General Index (Main and Parallel) ended on March 30 at 4202 points for a 7.73% increase in the first quarter, probably the best in Europe. The CySE/FTSE 20 ended at 1433 for a 7.63% quarterly increase. The Main market was the worst performer, closing 7.44% higher, while the Parallel index was the best performer in the first quarter, ending 20.4% higher. The Alternative sector index closed 11% higher, while the Investments sector was up 9.4%.

During the first quarter there was a record number of mergers and takeovers in the banking sector with the biggest deal involving the purchase of the 8.02% stake held by Piraeus Bank in Bank of Cyprus by Marfin Popular Bank.

The deal also coincided with the sale of about a 7% stake held by Marfin Popular in Hellenic Bank to the Church, while Emporiki Bank S.A. lifted its stake in Emporiki Bank Cyprus.

During the quarter, the market was also witness to a brutal war for control of Universal Bank being waged between two shipping companies based in Limassol and the Aspis Group, while Aspis also waged another battle for control of Universal Life.

The banking sector was not the only sector where many deals were reported. There was heavy activity in the financials, trading and property as well as the hotels sectors with all indications pointing to more M&A activity during the rest of 2007 keeping the market well bid.

 

Lacklustre performance

 

The CSE gains compare very favourably to the performance of more developed markets, which, with the exception of China, underperformed Cyprus.

During the first quarter, the FTSE 100 in London ended 1.4% higher, the CAC-40 in Paris was up 1.67%, the German Dax was up 4.85%. The Greek ASE General had a relatively better performance, ending the first quarter with gains of 5.67%.

For the quarter, the Dow ended down 0.87%, while Nasdaq closed up 0.26% and the S&P ended up 0.18%. The quarter marked Wall Street’s worst first quarter in two years. The Nasdaq’s net move was the smallest quarterly move for the index, in either direction, in at least 27 years. The quarter saw bouts of increased volatility, with investors worrying that problems in the subprime mortgage market may seep into the broader economy and hurt profits.

In Japan, the Nikkei 225 index ended flat with gains of 0.36%, Hong Kong’s Hang Seng was down 0.82% while the China Shanghai Composite closed 19% higher in the first quarter.