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Cyprus Stock Exchange can become gateway to capital, CSE president says

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CSE president Marinos Christodoulides

President of the Cyprus Stock Exchange (CSE) Marinos Christodoulides recently released a statement underscoring the significance of developing the bond market within the CSE framework.

In addition, Christodoulides highlighted the introduction of European Medium-Term Notes (EMTNs) from the Republic of Cyprus into the CSE, alongside ambitious growth plans for the exchange.

“The Cyprus Stock Exchange, as part of its broader effort for continuous enhancement of its products, markets, and services, is proceeding systematically with the implementation of significant developmental programmes and plans,” the CSE president said.

“In this context, particular importance is attributed to the necessity of developing the Secondary Bond Market at the CSE, as international bond markets covering both government and corporate bonds constitute markets of significant importance and gravity in economic development and investment activity,” he added.

Christodoulides highlighted that the Stock Exchange recently announced the simultaneous introduction of the European Medium-Term Notes of the Republic of Cyprus (EMTNs) to the CSE, starting from March 27, 2024. These bonds were initially launched in a foreign market, namely the London Stock Exchange.

“This development is deemed to be particularly important for our exchange, as it significantly broadens the capitalisation of the CSE Bond Market in terms of the total value of listed bonds (with an addition of capitalisation exceeding €11.5 billion to the CSE bond market), while simultaneously providing additional options for investors operating in the Cypriot market to trade in our international bond issuances,” he said.

He also said that “at the same time, undoubtedly, the investment product of the CSE is further enriched”.

Moreover, he noted that to effectively facilitate the achievement of this goal, the CSE has established a link with the Swiss Depository SIX SIS to serve on a cross-border basis the transfer of these bonds to and from the CSE, thus enabling their trading on the CSE on a secondary basis.

The CSE presented an extra proposal to the Ministry of Finance in 2023, aiming to initiate the issuance of a portion of the national debt domestically and subsequently introduce it to the CSE.

This process is anticipated to be undertaken by the Ministry throughout 2024, marking another significant advancement in bolstering the secondary market for government bonds through the CSE.

Furthermore, Christodoulides elaborated on the potential expansion of the bond market, suggesting that, similar to other developed markets, the CSE could introduce debt instruments and bonds issued by semi-governmental organisations, public utilities, and local government entities.

“Recognising further the significant development of the investment product of Green Bonds on an international basis, the Stock Exchange has made special arrangements in its pricing policy to encourage such issuances for their introduction to the CSE,” Christodoulides said.

“Already, the first Green Bond of a Cypriot company of Scandinavian interests was introduced to the CSE during March 2024, and the Stock Exchange now looks forward to further developing this market,” he added.

He also noted that due to the Stock Exchange’s vigorous efforts in previous years, the rate of the special defence contribution on interest earned from corporate bonds has been decreased from 30 per cent to 3 per cent for those listed on a recognised stock exchange.

This reduction, he explained, aims to incentivise the introduction of more corporate bonds to the CSE.

“It is a fact that the Stock Exchange needs new companies to enrich its product and to expand the investment options offered through the CSE,” the CSE president said.

“In this direction, the Stock Exchange has submitted proposals to the government for the provision of tax incentives, within the framework of the ongoing broader tax reform, aiming to revive the interest of new businesses for their introduction to the CSE,” he added.

He stressed that “this aspect is also very important, in order to to rekindle interest in the introduction of new companies to the CSE”.

Furthermore, Christodoulides said that “the privatisation of the CSE, which is being initiated, is a project of utmost importance aimed at finding a strategic investor with recognised experience and expertise to add further value and perspective to the Stock Exchange”.

He noted that in this context, a bill has been prepared, which underwent consultation from December 2023 to January 2024.

The bill is now being finalised for submission to the legal service of the Republic of Cyprus for necessary legislative processing.

Following this, it will be presented to the House for approval. Upon enactment, further steps towards completing the privatisation of the CSE can proceed.

“The above, summarised, reflect some of the coordinated actions of the Stock Exchange for further development and proper positioning in the new, demanding, and constantly evolving modern financial environment,” he said.

“The Stock Exchange must therefore be upgraded and enriched to become the main tool for economic development in Cyprus, providing the opportunity to raise capital and channel it into the most productive investments in our country,” he added.

In addition, he stated that this will take place “within the framework of the increased transparency provided to investors based on the CSE operating framework, while simultaneously providing an expanded range of alternative options to attract investments, especially from abroad”.

“We at the CSE council will continue this effort in order to succeed in our objectives, to the extent possible, and achieve positive results,” the CSE president said.

“The support of the government and the state in general is necessary and imperative for us to achieve our goals,” he concluded.

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