This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious




Cyprus Government Tries To Moderate Market Falls

Jason Gorringe, Tax-news.com, London

15 August 2000

The Cyprus Government is continuing with its efforts to stem the seemingly endless fall of the Stock Market, now at barely half its level of a year ago.

Finance Minister Takis Clerides called a meeting of the CSE Council, the stockbrokers and investors associations, the Securities and Exchange Commission, bank and insurance chiefs and the Chamber of Commerce.

The Minister said afterwards: "We had a very useful exchange of opinions about the conditions prevailing on the stock market and measures which need to be taken to strengthen the market. What transpired was that the most fundamental problem is one of investor psychology which needs to be improved."

The Government claims that investment companies are sitting on £700m which they are reluctant to release onto the market. Klerides said he had assurances from institutional investors - including banks and insurance companies - that they would be net buyers.

At similar but more private meeting two weeks ago the Minister was successful in drumming up support from the Bank of Cyprus and Laiki, which resulted in a sudden rise of nearly 10% in the index. But it was a short-lived
recovery. The Minister was also successful in persuading the Central Bank to reverse its policy of banning commercial bank loans to investors.

Mr Klerides is presumably enough of an economist to know that he cannot, Canute-like, turn back the will of the market. A 700% rise in 1999 was never likely to be sustained, and a loss of 50% from such a level is not unreasonable. So he is just trying to smooth out the inevitable correction. Other techniques he may use include measures to encourage social and insurance funds to invest in equities; and he will try hard to force pending market legislation throogh Parliament. His underlying motives are no doubt political - the Government does not want to be seen standing idly by while private investors (who came late into the market at a high level) suffer the consequences of their behaviour.

.

 

 






Write a comment