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COVID19: Cyprus Stock Exchange has role in restarting economy

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By Nicos Tripatsas

The spread of coronavirus has brought catastrophic consequences, especially the loss of hundreds of thousands of our fellow human beings, while the damage to the global economy is enormous.

Global markets have felt the shock, as the vast majority of businesses have taken multiple blows.

Stock markets in developed countries are a barometer for the wider economy. They are particularly sensitive to new developments, both at the corporate and macroeconomic levels, anticipating the directions that businesses and economies will take.

To understand the importance of stock markets, it is enough to note that everyone is looking at trends recorded, especially in times of adversity, with the latest example being the Covid-19 pandemic.

The Markets make efforts to operate uninterrupted in times of crisis, thus exhibiting their importance for economic stability and development.

Respectively, the Cyprus Stock Exchange (CSE), utilising its technological potential and developed infrastructure, has been operating continuously since the first day of the outbreak and the imposition of restrictive measures.

Most of our staff were able to work from home, as well as the majority of market participants (Members – stockbrokers, clearinghouses), ensuring the smooth operation and continuity of the Market, in these unprecedented conditions.

A number of listed companies on the CSE were affected by this great crisis. While referring to the measures taken by the Government and the State to minimise the impact and to support citizens and businesses affected, one must not forget that the stock exchange can also contribute.

Markets around the globe are a key lever for business development, providing them with clear advantages, the ability to raise the capital needed to grow and mechanisms to set prices for listed values, within an increased liquidity framework.

The CSE, which operates within the framework set by European authorities and is under the full supervision of the Cypriot Authorities, has various Markets, products and services, offering different corporate strategic choices.

In addition to its traditional Market, i.e. the Regulated Market and its categories (Main and Parallel Market), the CSE also operates its New Market, as a multilateral negotiation mechanism, based on defined European frameworks.

These markets are designed to cater to a wide range of business strategic options, at a competitive cost, with flexibility and adaptability.

Established Cypriot companies, but also small dynamic ones, start-ups, companies with large infrastructure and public interest projects, as well as semi-governmental organizations, could find ways to boost their development through the CSE.

Taking in account the corresponding added value in the markets, it was reported that, prior to the coronavirus crisis, the European Union had drawn up strategic plans to encourage businesses and investors to make more use of the markets (specific reference is made to the ‘capital market union’, crowdfunding, etc.) aiming to have similar results compared to the US example, where market participation is clearly much higher than in the EU.

Through the Cyprus Stock Exchange companies can issue a variety of products. In addition to the “traditional” option of importing shares, businesses can also trade corporate bonds.

Relatively recently, at the initiative of the CSE, the percentage of the extraordinary defence contribution paid in interest granted to corporate bonds has been reduced (from 30% to 3% for natural persons and welfare funds). Meanwhile, a bill is being promoted to extend the reduction to cover legal entities and pension funds investing in them.

Corporate bonds have seen enormous growth in demand internationally.

Cypriot entrepreneurs should also consider this option so that it can gradually take its place as a fund-raising tool in the market.

The CSE has submitted proposals regarding tax incentives to businesses and investors, to encourage the introduction of new companies in the stock exchange platform.

The CSE can offer a number of benefits to established companies which are currently not listed.

Various Options

At the same time, the CSE can provide significant additional options for investors and will undoubtedly help further modernise and improve corporate governance in business.

At the moment, to limit the consequences of Covid-19, procedures regarding applications submitted by foreign investors for citizenship are being fast-tracked. The current Citizenship for Investment scheme offers each investor the option of investing a maximum amount of €200,000 in shares from the CSE. This limit should be increased.

The CSE operates with full transparency and transactions are monitored by professionals, who in turn are under the strict control of the Capital Market Commission.

Also, the CSE markets, mentioned above and especially the NEW CSE market (efforts are being made to enrol the market as a Small and Medium Enterprise Development Market under the relevant European Legislation), can be included as investment options permitted for foreign investors wanting to participate in Cyprus’ CIS scheme.

The CSE has carried out studies and efforts have been made specifically for the development of the Market of Maritime Bonds and in general for further strengthening shipping as an important sector of the economy.

In the field of Collective Investment Schemes (Investment Funds), the CSE already provides the possibility of their introduction to the market.

It would be an omission not to mention that the CSE, already provides those interested in the possibility of using the electronic signature for their activities, while it has also been active in services and investment, and in the energy sector.

The CSE, through its strategic plan drawn, fully responding to the new conditions, is constantly adapting its Markets, products and services to meet the ever-changing needs of Market participants.

It remains open to suggestions from the market participants, to constantly improve its services.

In this context, an invitation is extended to entrepreneurs to support this effort and to consider prospects offered by the CSE.

Institutional and private investors, as well as capital managers, should add CSE products to their investment options, always upon the advice from an approved investment advisor.

Everyone’s support towards the market and the country’s businesses will undoubtedly go a long way in restoring economic normality, stability and growth.

The writer is Acting Manager of the Cyprus Stock Exchange