Cyprus Stock Exchange on privatisation track

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The Cyprus Stock Exchange is moving ahead with its privatisation plans, aiming to fulfil its role for the further development of local companies and attract foreign investments.

Still ‘unfairly’ carrying the stain on its reputation from the bubble that burst over 20 years ago, the CSE is seeking a strategic exchange partner to boost its attractiveness.

In comments to the Financial Mirror, CSE Chairman Marinos Christodoulides said going into partnership with a well-esteemed strategic partner will offer a lot to the bourse.

In the meantime, however, he stressed there is room for improvement, and the state should embrace the stock market by facilitating the entry of new companies.

“An active capital market can promote economic growth and entrepreneurial investment.

“Corporate funding in Cyprus is virtually limited to bank loans, and from one perspective, this has contributed to the problems of the banking sector by potentially tempting banks to enter into riskier financing.

“The Cypriot economy will certainly benefit from an active stock exchange, both from the perspective of liquidity in the corporate finance market, but also in establishing Cyprus as a hub for financial services,” said Christodoulides.

Privatising the CSE was put in motion a year ago in May when the Cabinet had approved the Strategic Plan to find a strategic investor.

The plan provided that a consultant be brought on board to identify legal gaps and propose legislative changes to facilitate the transition.

The consultant will also be actively involved in the selection of the strategic investor.

“We are currently evaluating the bids we received from experts and consultants.

The winning consortium will have 14 months to find the best solution for the strategic investor, sometime in 2022.”

Christodoulides said the process would also be monitored by the CSE and the Ministry of Finance.

“I am sure that the Cypriot market will soon find itself in fertile ground.”

He argued that investors should be assured the CSE will be continuously working on improving services.

Christodoulides said the CSE is currently running several initiatives, including building relationships with stock exchange markets abroad, while also entering new areas of activity, such as the energy sector.

“We have pushed for and have come to an initial agreement to act as a clearinghouse for any agreements carried out through the market operator.”

Energy market

The CSE had been eyeing the energy sector for some time now.

Initially, it planned to act as the country’s electricity market operator, but the Finance Ministry shot down its proposal.

In cooperation with the Hellenic Stock Exchange and the Athens Stock Exchange, the CSE submitted a comprehensive proposal to the Ministry of Energy offering services for the operation and management of a competitive electricity market.

Christodoulides said the deal was made possible due to the CSE’s experience and know-how, acquired through its partnership with HEnEX, the Hellenic Energy Exchange Market, of which it owns 10%.

“We are one step away from the implementation of an agreement with the Swiss Stock Exchange SIX, one of the largest, which will give us the opportunity to list Cypriot bonds worth billions of euros with a parallel listing.

“The capital market of Cyprus must and can function differently for the good of business, society and the country in general.”

The CSE chairman said attracting new investments – and especially foreign – is one of the top priorities.

“The CSE took the initiative to strengthen the economy further, attracting sound investments so that we can soon enter a growth trajectory as we exit the pandemic.

“Attracting new capital is another serious issue, and there is room for improvement.

“We need the state to facilitate and encourage both local and foreign companies to enrol on the CSE. It could be done with tax incentives on dividends.

“Despite previous challenges and recent ones posed by the coronavirus pandemic, there is interest in the introduction of new companies, for share capital and their corporate bonds.”

Christodoulides said the domestic money market is characterised by reduced liquidity due to the pandemic and restrictive measures, which affect investment movements.

It is also no secret that the Cyprus stock market has been affected by corporate, financial, and banking problems of the past, creating a toxic environment far from ideal for new listings.

“This is the riddle that we are trying to solve through specific moves, and we believe privatisation of the CSE will give us new impetus.”

The Nicosia bourse hasn’t been unable to move forward since a stock market bubble spectacularly burst in 2000, with many Cypriots losing their savings.

A banking crisis in 2013 where savers lost bank deposits also scarred the financial landscape.