For many investors, the Cyprus Stock Exchange (CSE) started 2024 just as 2023 ended, with anemic daily volume which in any mainstream market would normally represent about a tenth of a single security.
Even local brokers don’t follow it and they have no idea which the best performing stock was nor do they have any curiosity to find out.
But despite its pathetic performance, the CSE has a few aces up its sleeves. Gambling terms are more appropriate to describe a market, that is anything but a magnet for capital and investment.
Shares of Bank of Cyprus had a remarkable performance gaining 90% in the past 12 months. However, we find nothing remarkable to say about the company itself which went bankrupt a decade earlier and together with Laiki Bank brought the Cyprus economy to its knees, leaving thousands of depositors and investors with billions of losses.
Shares of its main rival Hellenic Bank also had a good year with a 50% rise ion the stock value driven mainly by Eurobank’s takeover bid. This represents the most significant corporate action of the year as Eurobank, a main player in Greece’s banking sector, is looking at absorbing the vast but not so profitable retail business of Hellenic and merge it with its lucrative corporate business that its local subsidiary has developed over the years.
Banking competition
A potential acquisition will likely form the biggest credit institution on the island and deprive the Cyprus economy of healthy banking competition that already suffers through the lowest deposit rates in Europe and the highest lending rates.
Consequently, the failure of competition to work resulted in the highest net interest income in the history of banking in Cyprus, which explains the exceptional stock performance of both listed banks.
Yet, one company stands out with consistent growth in total shareholder return, that is dividend plus equity growth.
I believe that Logicom, a high tech retailer in Cyprus and the Middle East with substantial indirect investments in the banking sector in Cyprus deserves the ‘best company’ award (though such an award does not exist).
In the past 12 months, the share price grew 49%.
The last time the company paid dividend in July 2023, the yield stood at 3.79%.
However, the free float of shares is small and with many loyal small investors unwilling to part with their favourite company, its daily trading volume is hardly significant.
Despite these problems, I remain optimistic about this particular market although the risk is significantly higher for those willing to bet on its fortunes.
Past performance always tells a lot about the future, however unexpected events or black swans can change market parameters drastically.
Michael Olympios is Editorial Consultant for the Financial Mirror
