Cypriot Finance Ministry Releases 'Blueprint' For Stock Exchange Reforms

by Philip Morton, Investors Offshore.com

24 July 2002

The Cypriot Finance Ministry's 'blueprint' for reforming the Cyprus Stock Exchange has received a less than enthusiastic response from some sections of the jurisdiction's media.

In a report released this week, the Cyprus Weekly explained that: 'Essentially this represents the general outline of the reform measures that the government is considering for the revival of the Stock Exchange and the harmonisation of Cyprus legislation with that of the European Union.'

However, despite observing that 'clearly any improvement of the institutional framework for the stock market would be welcome,' the newspaper asserted that an equally important factor in the CSE's recovery is an increase in investor confidence, which is unlikely to be forthcoming any time soon:

'Investor confidence requires a recovery in market prices and that appears more and more unlikely, because company prices do not justify a general increase in stock prices,' the report explained, continuing:

'Furthermore, the collapse in share prices following the 1999 bubble took place during a period of good economic growth when companies should have been doing well. This year the economy is in difficulties...consequently the prospects of a general market recovery are not good.'

The general feeling in Cyprus is that the 'blueprint' reform plan formulated by the Finance Ministry should help to improve things in the medium- to long-term, but does not go far enough in addressing the CSE's immediate problems. In the wake of recent US accounting and corruption scandals, it has been suggested that any reform plans should also address corporate governance, investor democracy, accounting standards, and the separation of accounting from consulting.

The Cyprus Weekly concluded its report on the situation this week by observing that there will be no 'quick fixes' where the CSE is concerned:

'The process of re-establishing confidence in the stock exchange will be a slow one and will depend not just on the institutional arrangements but also on the performance of the market. It is a pity the government had not done its homework properly before the Cyprus Stock Exchange was created.'

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