The government has decided to move ahead with the privatisation of the stock exchange, and to seek a partner exchange for it abroad, Cyprus Stock Exchange Chairman Marinos Christodoulides said in a note to the Cyprus Mail.
Advisors are at this time submitting offers for tenders that were published around yearend. Advisors will be selected , and a team of consultants will move privatisation forward within the next few months, the note said.
“The ultimate aim of this process and the privatisation of the Exchange is for the Cyprus Stock Exchange (CSE) to obtain further expertise and know-how which could be provided by the potential investor (Exchange), with a wider reputation internationally. It is envisaged that such an investor, will provide added value to the CSE and will help it to attain its vital role for the further development of local companies, for the attraction of investments in Cyprus and also for contributing to the further development of the economy of Cyprus,” the note explained.
Privatisations in Cyprus have been roundly rejected by opposition parties in parliament. “But the privatisation of the CSE is not seen in the same light,” a source close to the government told the Cyprus Mail. “As a result, this is indeed going forward rapidly.”
While the Cyprus bourse is already partnered with the Athens stock exchange, a larger market in the region might be sought as a partner; Israel or the UAE could be considered.
“Although the CSE is operated by a competent, ambitious and well-organised team, it definitely needs more than this. An external thrust, that will enable it to become more extrovert, versatile and visible, providing means to access funds and investors to grow and deliver on a long-term vision,” comments Christophoros Anayiotos, board member and head of Deal Advisory at KPMG in Cyprus, in an interview with the Cyprus Mail.
Advantages of privatising the CSE
The CSE is still under a cloud from issues that arose more than 20 years ago.
“It is so unfortunate that a such an important institution in any modern economy, its stock exchange, is, in Cyprus, still being unfairly denounced because of its ‘bubble’ (more than 20 years ago!), while in essence the disaster was not because of the existence of the exchange but because it had been abused and admittedly not properly monitored,” noted Anayiotos.
“An active capital market can fuel economic growth and entrepreneurial investment. The corporate funding in Cyprus is practically restricted to banking loans and, from one perspective, the lack of a liquid stock exchange has contributed to the banking industry problems by potentially leading the banks to engage in riskier financing. The Cyprus economy will surely benefit from an active stock exchange, both from the perspective of the liquidity in the corporate finance market, but also in establishing Cyprus as a financial services hub.”
Decision taken in May 2020; tender issued at yearend
The Government had appointed consultants to prepare a comprehensive study for the strategic directions and alternative solutions about the CSE. This study was submitted to the Ministry of Finance, in the second half of 2019, Christodoulides recounted.
“After assessing this study, the Council of Ministers has taken a relevant decision in May 2020, based on which, the CSE should be wholly privatised. Given this, a Steering Committee comprised by Executives of the Ministry of Finance and of the Exchange was formed, with the mandate to undertake the whole process of the privatisation of the Exchange.
At present, the Committee is examining a number of proposals – tenders that have been received by Consultants, and shortly a decision will be taken for the appointment of a reputable consultant’s team for the purpose of privatising the CSE and seeking a reputable Exchange, to be the new shareholder of the CSE.
As per the content of the documentation issued for this tender, the successful consultants will be provided a 14-month period, in which they will be dealing with many important relevant issues, such as legal transformation (creating of private law companies to take over the CSE’s activities), labour issues etc, but most importantly for evaluating and selecting potential investors and making a final proposal for a strategic investor to acquire the Exchange. The Government, which at present is the owner of the CSE will be involved accordingly, for the final decision,” the note said.”
Christodoulides noted that the securities market in Cyprus should be further strengthened in order to be able to play a significant role in the Cypriot economy and therefore act as a catalyst for the further development of Cypriot enterprises and of the economy, in general.
“In all advanced economies, as well as in emerging economies, the capital market plays a significant role for the development of the economy and it is an important tool in the area of capital raising,” Anayiotos adds.