Cyprus Stock Exchange Chairman: The future is bright – and privatised

Marinos Christodoulides, Chairman of the Cyprus Stock Exchange (CSE), discussed its performance in recent years, the efforts to attract more companies and investors, and the present stage of its planned privatisation, in an interview with GOLD magazine’s February issue.

Which financial instruments are listed and traded on the CSE and what have been the most popular in the past few years?

Shares, bonds (corporate, government, treasury bills), rights, warrants and collective investment schemes can be listed and traded. The most popular are the equities traded in the financial sector.

How have financial instruments traded on the CSE fared in the past few years? Are you satisfied with their performance, given the overall economic picture?

There is no doubt that the current unstable global economic situation has had a severe impact on the CSE’s performance. The effects of the pandemic and the war in Ukraine have gravely impacted the local and global economy. This situation has subsequently affected the financial operations of companies and investors, and the CSE. We strive to boost companies’ and investors’ interest in the stock market through various initiatives. These, in combination with this year’s developments in the banking sector, have given a renewed impetus to the CSE and pushed the General Index higher. In our view, if the global economy stabilises and the war in Ukraine is settled, the CSE will have a positive performance in 2023, since we see companies promoting new plans and also because other types of investment (bank deposits and real estate) no longer offer high returns. These developments are expected to benefit the CSE market. Of course, everything is still dependent on the course of the Cyprus economy, which needs to tackle numerous challenges ahead.

What are you doing to encourage more companies to list on the CSE?

The CSE is always trying to attract new companies. We have created the Emerging Companies Market, which has more flexible listing requirements and obligations than the Regulated Market. Companies have a variety of markets to choose from for listing, depending on their needs. We are also very close to introducing another new market – the Small Medium Enterprises (SME) Market – and aiming to attract as many companies as possible. Additionally, we offer a very competitive pricing policy compared to other exchanges, which is also attractive to interested companies. We have proposed to the Ministry of Finance a number of tax incentives related to the listing of securities and, recently, a new amendment to the tax legislation was passed, reducing the defence levy from 30% to 3%. Nevertheless, our efforts are ongoing. In the next few months, CSE plans to bring all market stakeholders together to exchange ideas on ways of attracting both companies and investors to the CSE. We also plan to promote the CSE and its companies in international forums and events in Athens, London and elsewhere.

How do you view the prospects for 2023 for market capitalisation?

Stock markets’ capitalisation is attributable to the stock prices they negotiate – the higher the stock prices, the higher the stock market capitalisation. Our aim is to increase the number of companies listed on the CSE and thus attract investors. A more active stock exchange market will definitely affect the CSE’s capitalisation, which is something that we hope for in 2023. Despite the difficult economic climate on a global level, the Cyprus economy seems to have adjusted to the current conditions. The war in Ukraine and the energy crisis, which resulted in an increase in the prices of fuels and grain, led to higher prices for goods and services, which in turn sent inflation soaring to new heights in 2022. This may have a negative impact on growth for 2023. Nevertheless, despite the effect of the geopolitical crisis on prices, the Cyprus economy is expected to perform well this year.

Since 2016, the investment funds industry has experienced a threefold increase, with assets under management currently at around €10 billion. How is the CSE supporting this sector?

The rise of investment fund activities in Cyprus is remarkable and beneficial for the economy. Unfortunately, the increase in managed capital is disseminated in various economic sectors and not through the CSE. It is an issue that we are trying to resolve. As CSE, we try to support the institution of investment funds and cooperate as much as possible. As already mentioned, we maintain a separate market for Collective Investment Schemes, which splits into (a) the Tradable Collective Investments Schemes Market and (b) the Non-tradable Collective Investments Schemes Market. A CSE listing provides visibility and transparency to investors with the prices of listed funds posted on the CSE website and reported to the market through major data vendors. If funds are tradable, the price mechanism is provided through Net Asset Value (NAV) postings and market prices. This parameter is important for fund managers who require a publicly quoted exchange price for their investments. The Cyprus Stock Exchange currently has 16 listed non-tradable Collective Investment Funds. Additionally, two AIFs have been listed on the non-tradable Collective Investment Schemes Market.

At what stage is the planned privatisation of the CSE right now? How will the Cyprus economy benefit from this move?

In cooperation with the Ministry of Finance, we have appointed experts to undertake all the necessary procedures and to find a strategic investor that will enable the CSE to grow, offering Cyprus entities and investors greater opportunities. Preliminary research has revealed substantial interest by reputable foreign stock exchanges in acquiring the CSE and we hope to see this interest expressed also through the procurement process. We consider that a private Cyprus Stock Exchange will significantly contribute to the economy, as it will be more flexible and efficient in its operations, which will make it easier to attract more companies and investors. Cyprus will thus have a stock exchange with greater potential to have a positive impact on the island’s development. We are confident that the CSE has a bright future as a privatised entity.

Can you tell us of any other initiatives or developments that will enable the Cyprus Stock Exchange compete with larger regional players?

Apart from the ongoing privatisation process, the CSE is undertaking various initiatives to boost its activities. Among these are its promotion on foreign markets, the exploration of new markets, the enhancement of its structural and institutional framework, the establishment of competitive fees, and strategic cooperation with other stock markets. Through these initiatives, we aim to attract new companies and raise interest among new investors. These will increase the CSE’s competitiveness, which is our ultimate goal. Cyprus will finally be proud to have its own competitive regional stock market.

Finally, where would you like the CSE to be in the next few years?

Our main goal is to offer Cyprus a modern, flexible and functional stock exchange. We want to see the stock market active again – strong enough to contribute to the economy. Hence, we will do our best to enable the CSE to play this role. In the next few years, we believe that the CSE will become a robust contributor to the island’s economic development.

(This interview first appeared in the February 2023 issue of GOLD magazine. Click here to view it.)