The second quarter 2008 losses of the Cyprus Stock Exchange (CSE) have narrowed to 3%, possibly a sign that the massive decline in equity prices from the start of the year has been overcome and that at current levels, the market is relatively cheap and offers attractive opportunities for investment.
The CSE GENX ended June 30 at 2811 points, a loss of 3% from its March 31 level of 2895, but was still down by 41.7% since the start of the year when the index was hovering at 4821 points.
A Financial Mirror survey found that the losses in Cyprus are by far the highest when compared with other markets, with only China losing more in the first half, down by 48%.
The other developed market losses are less severe. In the US, the losses are only 12.5%, in Japan 12%, while the losses for London’s FTSE 100 are 12.8% since the start of the year, 21% for the CAC-40 index in Paris and 20% for the German Dax. The losses for the main Athens index is also among the highest in Europe at 33.5%.
Financial Mirror analysts say that even though Cyprus banks and financial institutions have no exposure to the US sub-prime losses, massive position trimming and selling by foreign funds in the absence of buying by locals has been instrumental in magnifying the losses in Cyprus and Greece.
Tiny loss
With the CSE market capitalisation at EUR 12.6 bln at the end of June, compared to EUR 13 bln end of March, the monetary losses of the second quarter amounted to just EUR 400 mln, which is “tiny” compared to the EUR 8 bln loss in value since the start of the year, when according to Financial Mirror data, the total market cap was EUR 20.5 bln.
The steep market correction also finds the ratio of the CSE market cap declining below the total value of the GDP of Cyprus, which according to the Statistics Department amounted to EUR 15.5 bln at the end of 2007.
Heavy correction
Bank of Cyprus, the largest and most widely held stock in Cyprus, which also trades on the Athens Stock Exchange, has shed 37.6% since the start of the year, but is up 3.7% in the second quarter closing June 30 at EUR 7.78, based on improving fundamentals, the announcement of a major acquisition in Russia and its aggressive expansion drive in Greece and Romania, as well as its dominant position at home.
Marfin Popular Bank, the second largest stock which also trades in Athens, has shed 49% since the start of the year, but is down 11% in 2Q08, closing at its record low of the year at EUR 4.64.
Hellenic Bank, the third largest stock is down 49% since the start of the year and 12.6% in the second quarter, closing at its year low of EUR 2.35.
Other large cap stocks such as Louis and SFS have also followed the banks lower, with one of the rare exceptions in the Main Market being Aspis Holdings, up 49% in 2Q08 and A. Zorbas also registering gains.
More gainers
Despite all the doom and gloom, a number of smallcaps have recorded substantial gains from the start of the year. Trokkoudes & Kyros, which made its debut on the CSE in June is up a whopping 635% closing at EUR 1.25 compared to its IPO price of EUR 0.17.
Athos Diamond is up 121% at EUR 0.31, Laser Investments is up 71% at EUR 0.65, Cyprint is up 53% at EUR 0.95, while Woodland Design, which entered the market last year is up another 34% at EUR 2.96, on top of its hefty gains recorded last year.
Correct pricing
After the six-month fall in prices, equities are probably the most correctly priced class of asset and best positioned to stage a recovery when the credit crisis starts fading away.
The average gross price to earnings (p/e) ratio of the CSE as at end of June amounts to eight times, while when adjusted to company market capitalisation weight, the average amounts to 10 times, making the CSE one of the cheapest in the EU, according to Financial Mirror data.
Compared to property prices, which have yet to experience a correction or commodities, energy, art and most other types of investment, equities offer the best value-for-money investment, with a good chance of staging a rebound when conditions improve in international markets.
