Cyprus Stock Exchange Crisis Continues - Stockbrokers At Fault, Says Investors Group

Lisa Ugur, Tax-news.com, London

15 November 2000

There seems to be no improvement in the fortunes of the beleagured Cyprus Stock Exchange (CSE). Last week Tax-news.com reported that a Greek stock exchange expert, Demetris Tsimbanoulis, had been drafted in to spend 100 days examining Cyprus' stock exchange practices and operations, but news that a positive action plan could soon be on its way seems to have done little to quell investor anxiety. Earlier this week, a state of panic gripped the CSE as investors rushed in droves to sell their shares, and at the same time the Chairman of Investors’ Association PASEHA issued an attack against stockbrokers and the Securities and Exchange Commission, which he claimed did nothing to reveal discrepancies and illegalities that have led to the CSE's current sorry state.

The rush to sell shares this week caused a major fall in the index, which plummeted to its lowest level this year. It was hoped that the listing of Bank of Cyprus in Athens last week would boost the CSE, but according to stockbroker Costas Anastasiades, the fact that Bank of Cyprus shares did not rise to a level matching Cypriot investors’ expectations meant that many frustrated investors rushed to sell their stakes in the Bank of Cyprus. He said many investors decided to sell when they realised there would be no short-term gains from the bank’s listing in Athens, adding that the short-term approach to investment was still prevalent among Cypriot investors.

This panic-selling does little to help the CSE achieve some kind of stability. Marios Mavrides, an analyst and Chairman of the Business Management department at Cyprus College said: 'it is wrong to link the CSE to the Greek market because the two Stock Exchanges continue to be influenced by different factors..... panic behaviour on the floor was unreasonable and very dangerous.'

It is the stockbrokers, rather than the investors, who are being blamed for this week's panic. They have also been chastised this week by PASEHA Chairman Alkis Argyrides for ruling the CSE. He said that it is the stockbrokers who can pull the strings and determine price and index levels. Mr Argyrides claims that stockbrokers carry out transactions without in any way being controlled, they make phantom sales and carry out sale and purchase transactions in the name of investors, who are indebted to them. He has also accused the Securities and Exchange Commission (SEC) and CSE Council of not carrying out all the necessary controls, despite the fact that PASEHA had submitted specific complaints requiring investigation.

However, SEC Chairman Andreas Charalambous has hit back by saying no evidence of discrepancies and illegalities has ever been submitted to the SEC. He said there was always a person checking daily transactions on the CSE “as much as possible”, adding that general and vague complaints are not enough.

However, the Greek expert appointed by the Cyprus government seems to have faith in the CSE. Commencing his three-month long stint to try and find a cure for the ailing exchange, he said there are no stock markets without problems and room for improvement, no matter how modern and up-to-date they are.

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