April 10 - 16, 2013

2 | CYPRUS | financialmirror.com

Germanys choice: Eurobonds or EU collapse?

The euro crisis has already transformed the European Union
from a voluntary association of equal states into a creditor-debtor
relationship from which there is no easy escape. The creditors
stand to lose large sums should a member state exit the monetary union, yet debtors are subjected to policies that deepen their
depression, aggravate their debt burden, and perpetuate their
subordinate position. As a result, the crisis is now threatening to
destroy the EU itself. That would be a tragedy of historic proportions, which only German leadership can prevent.
The causes of the crisis cannot be properly understood without recognizing the euros fatal flaw: by creating an independent
central bank, member countries have become indebted in a currency that they do not control. At first, both the authorities and
market participants treated all government bonds as if they were
riskless, creating a perverse incentive for banks to load up on the
weaker bonds. When the Greek crisis raised the specter of default,
financial markets reacted with a vengeance, relegating all heavily
indebted eurozone members to the status of a Third World country over-extended in a foreign currency. Subsequently, the heavily indebted member countries were treated as if they were solely
responsible for their misfortunes, and the structural defect of the
euro remained uncorrected.
Once this is understood, the solution practically suggests
itself. It can be summed up in one word: Eurobonds.
If countries that abide by the EUs new Fiscal Compact were
allowed to convert their entire stock of government debt into
Eurobonds, the positive impact would be little short of the miraculous. The danger of default would disappear, as would risk premiums. Banks balance sheets would receive an immediate boost,
as would the heavily indebted countries budgets.
Italy, for example, would save up to 4% of its GDP; its budget
would move into surplus; and fiscal stimulus would replace austerity. As a result, its economy would grow, and its debt ratio
would fall. Most of the seemingly intractable problems would
vanish into thin air. It would be like waking from a nightmare.
In accordance with the Fiscal Compact, member countries
would be allowed to issue new Eurobonds only to replace maturing ones; after five years, the debts outstanding would be gradually reduced to 60% of GDP. If a member country ran up additional debts, it could borrow only in its own name. Admittedly, the
Fiscal Compact needs some modifications to ensure that the

penalties for noncompliance are automatic, prompt, and not too

severe to be credible. A tighter Fiscal Compact would practically
eliminate the risk of default.
Thus, Eurobonds would not ruin Germanys credit rating. On
the contrary, they would compare favorably with the bonds of the
United States, the United Kingdom, and Japan.
To be sure, Eurobonds are not a panacea. The boost derived
from Eurobonds may not be sufficient to ensure recovery; addi-

By George Soros
tional fiscal and/or monetary stimulus may be needed. But having such a problem would be a luxury. More troubling,
Eurobonds would not eliminate divergences in competitiveness.
Individual countries would still need to undertake structural
reforms. The EU would also need a banking union to make credit available on equal terms in every country. (The Cyprus rescue
made the need more acute by making the field even more
uneven.) But Germanys acceptance of Eurobonds would transform the atmosphere and facilitate the needed reforms.
Unfortunately, Germany remains adamantly opposed to
Eurobonds. Since Chancellor Angela Merkel vetoed the idea, it
has not been given any consideration. The German public does
not recognize that agreeing to Eurobonds would be much less
risky and costly than continuing to do only the minimum to preserve the euro.
Germany has the right to reject Eurobonds. But it has no
right to prevent the heavily indebted countries from escaping
their misery by banding together and issuing them. If Germany
is opposed to Eurobonds, it should consider leaving the euro.
Surprisingly, Eurobonds issued by a Germany-less Eurozone
would still compare favorably with those of the US, UK, and
Japanese bonds.
The reason is simple. Because all of the accumulated debt is
denominated in euros, it makes all the difference which country
leaves the euro. If Germany left, the euro would depreciate. The

debtor countries would regain their competitiveness. Their debt

would diminish in real terms and, if they issued Eurobonds, the
threat of default would disappear. Their debt would suddenly
become sustainable.
At the same time, most of the burden of adjustment would fall
on the countries that left the euro. Their exports would become
less competitive, and they would encounter heavy competition
from the rump eurozone in their home markets. They would also
incur losses on their claims and investments denominated in
euros.
By contrast, if Italy left the eurozone, its euro-denominated
debt burden would become unsustainable and would have to be
restructured, plunging the global financial system into chaos. So,
if anyone must leave, it should be Germany, not Italy.
There is a strong case for Germany to decide whether to
accept Eurobonds or leave the eurozone, but it is less obvious
which of the two alternatives would be better for the country.
Only the German electorate is qualified to decide.
If a referendum in Germany were held today, the supporters
of a eurozone exit would win hands down. But more intensive
consideration could change peoples mind. They would discover
that the cost to Germany of authorizing Eurobonds has been
greatly exaggerated, and the cost of leaving the euro understated.
The trouble is that Germany has not been forced to choose. It
can continue to do no more than the minimum to preserve the
euro. This is clearly Merkels preferred choice, at least until after
the next election.
Europe would be infinitely better off if Germany made a definitive choice between Eurobonds and a eurozone exit, regardless
of the outcome; indeed, Germany would be better off as well. The
situation is deteriorating, and, in the longer term, it is bound to
become unsustainable. A disorderly disintegration resulting in
mutual recriminations and unsettled claims would leave Europe
worse off than it was when it embarked on the bold experiment
of unification. Surely that is not in Germanys interest.
George Soros is Chairman of Soros Fund Management
and of the Open Society Foundations.
Project Syndicate, 2013.
www.project-syndicate.org

UK police probe plot to kill Borodin

l

Tycoons death threat follows murder of oligarch Berezovsky

London police probing the unexplained death of oligarch

Boris Berezovsky are investigating an alleged plot to kill another
Russian billionaire exiled in Britain, according to UK press reports.
A would-be hitman said he was offered $1 mln to kill former Bank
of Moscow president Andrey Borodin, 45, who fled to the UK two
years ago with his wife Tatiana. The existence of the plot, which
has been reported to MI5, is understood to have been a factor in
the surprise decision of the Home Office to grant Borodin asylum
in February claiming he was being persecuted by allies of Russian
President Vladimir Putin. His 140 mln pound home in Henley-onThames, Oxon, is 20 kms from Berezovskys Ascot mansion,
where the 67-year-old was found dead last month.
Borodin was labelled the new Berezovsky after funding
human rights groups opposed to Putins regime. And he branded
Russias charges of fraud involving huge loans as trumped up.

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Thames Valley Police said it received a report about a

perceived threat to a 45-year-old man last December. Police
sources added that a potential hitman had been approached by
influential political figures in Chechnya and offered a large sum of
money to kill Borodin. The ruling elite in Chechnya is known to
have close ties to the Kremlin, reports added.

France to publish cabinet

finances as scandal deepens
Frances Socialist government promised on Monday to publish
details of individual ministers assets next week as it scrambled to
stem a deepening scandal over a former budget ministers secret
foreign bank account.
Jerome Cahuzac quit his post last month and was placed under
formal investigation for alleged tax fraud last week as he acknowledged he had been caught in a spiral of lies over his previous
denials of holding a Swiss bank account.
The affair risks upsetting President Francois Hollandes economic reform effort, with even left-wing allies criticising his handling of the scandal. Hollandes opinion poll ratings are already at
record lows for his failure to tackle unemployment.
To begin with, wealth declarations of all the members of government will be made public by April 15, a statement issued by
Hollandes Prime Minister Jean-Marc Ayrault said.
The statement said the move - which echoes requirements in
the United States and elsewhere for public officials to make asset
declarations - would be followed by a law setting out moral standards in public life in coming months, it said.
Swiss RTS TV reported on Sunday, citing banking sources, that
Cahuzac sought to transfer 15 mln euros from one Swiss account
to another - far more than the 600,000 euros he said last week he

had in an undeclared foreign account.

Reached on Monday, Cahuzacs lawyer declined to comment.
Finance Minister Pierre Moscovici - the senior minister to
whom Cahuzac reported in government - has rejected criticism
from the French right that he was too ready to believe Cahuzacs
denials and did not adequately investigate the matter.
Weekend surveys found 60% of the public want Hollande to
reshuffle his team and threequarters view most politicians
and elected officials as corrupt.
Hollande has a slim parliamentary majority without the backing of far-leftists and Greens,
so could still scrape through an
upcoming law to loosen hiring
and firing rules, and a 2014
pension overhaul, without
their blessing. But noisy
protests could limit what he
can do, especially as his
approval ratings have slumped
to as low as 22%.

April 10 - 16, 2013

financialmirror.com | CYPRUS | 3

Natgas earnings at 4 bln a year, says Kretyk

l

Revenue share starting at 900 mln in 2020, then rising

Earnings from the sale of natural gas export contracts

could reach as high as 4 bln euros a year, once upstream production has started from offshore gasfields that are currently
being explored, according to a senior government official has
said.
Cyprus has estimated reserves of about 40 trln cubic feet
(tcf), that corresponds to a value of approximately 400 bln
euros over a period of 20-25 years, said Charles Ellinas, executive chairman of the state oil and gas company KRETYK.
If the state can only collect about 25% of these profits,
based on revenue sharing agreements, then state earnings
would be about 4 bln a year, Ellinas told CyBC radio.

However, former Trade and Energy minister Neoclis

Sylikiotis said that earnings would start at about 900 mln
euros in the first year, from about 2020, with the revenue rising gradually to the 4 bln target.
No matter how fast Noble Energy or other license operators start drilling, gas flow from Cyprus offshore fields is not
expected any time sooner than 2018, Ellinas said, adding that
we cannot sign a memorandum of understanding (MoU)
with Noble in July, as initially planned, as there have been too
many and unnecessary delays, to conclude the revenue sharing agreements.
Saying that KRETYK is currently undermanned, Ellinas

had a glimmer of hope for the economy, adding that the

Vassiliko area, where the gas liquefaction plant will be established, will become an energy hub for Europe by 2020-2025.
He added that state gas importer and distributor DEFA
needs 500 mln euros to build an islandwide natural gas network to reach all households and that this venture alone will
create hundreds of jobs for skilled and semi-skilled workers
who will have enough work over the next decade to connect
homes to the national gas supply grid. Ellinas added that this
need calls for the introduction of more vocational courses for
mechanical engineers in local colleges to satisfy the drastic
need that will follow.

Noble keen on LNG plant

l

Wants Cyprus govt to expedite plans at Vassiliko; Chuck Davidson to visit Israel

Noble Energy, operator of the exploration license for natural

gas and oil in Block 12 south east of the Cyprus coast, is keen
to go ahead with plans to build an onshore liquefaction plant in
partnership with the Cyprus government in order to process
the output of all offshore gasfields.
Charles Davidson, chairman and CEO of Houston-based
Noble, believes that liquid natural gas (LNG) is the most viable
option to export the fuel, not a pipeline, as the product would
reach the liquefaction plant at Vassiliko from where it would be
loaded on ships and exported.
Davidson said that his company has asked the Cyprus government to expedite the process by allowing an additional partner to join the venture, similar to a deal already concluded in
Israel with Australian operator Woodside, and to proceed with a
commercialisation framework for the multi-million terminal.
A site has already been identified that will be able to accommodate multiple trains from other license operators, such as
Total, ENI and Kogas.
With the right site and the right port, shipping of LNG can
start with benefits to all, Davidson said, adding that Cyprus has
shown greater commitment to such a terminal, rather than
Israel, that has yet to identify a location.
Noble determined an initial estimate of 5-8 trln cubic feet of
natural gas in the Aphrodite Block 12 within the Cyprus
Exclusive Economic Zone, adjacent to Israels Leviathan gasfield which is believed to hold record amounts of natural gas
reserves, estimated at 37 tcf.
Noble has already started production at the nearby Tamar
field and considers these three gasfields as its top priorities.
A drilling platform is expected to conclude its work at another Israeli gasfield and will make its way to Aphrodite some time
in June to conduct a second appraisal well with the first result
some 75 to 90 days after that. Date will then be collected and
computed into various models that will take another 60 to 90
days to complete. Thus, a real picture of Cyprus natural gas
wealth, at least in Block 12, will not be known until October.
In the meantime, Davidson said that data so far has determined that the appraisal well would either confirm reserves at
25% less than the 5 tcf estimate or 25% more than the upper
end of 8 tcf.
Whatever the case, Cyprus will not need any more than 1 tcf
of natural gas for all its needs, so, the remainder from Block 12,
as well as other blocks will be destined for export.
Noble wants to see some sort of cooperation with Israel to
jointly utilise the infrastructure, such as the liquefaction terminal at Vassiliko, for which Israeli investors have also shown
interest. The bigger, the better. Scale is your friend in LNG,
Davidson said, adding that such a terminal would need four

years to build, maybe three.

Meanwhile, foreign minister Ioannis Kasoulides, who was in
Tel Aviv on Tuesday, said the Cypriot government is continuing talks with Israel on ways to jointly exploit their mineral
reserves.
One option is to pipe the gas onshore to Vassiliko, with the
pipelines and liquefaction plant expected to be in place by 201920 at a cost of about 10 bln euros.
Kasoulides said it remains to be seen whether Israel wants to
be part of Cyprus energy plans, but that the construction of the
plant will take place anyhow.

VISIT TO ISRAEL
Nobles Charles Davidson will visit Israel this week to mark
the start of gas flow from the Tamar field. The visit is reportedly also intended to help persuade the Israeli government to
allow gas exports that would open the way to pipe natural gas
to the Vassiliko terminal for liquefaction and export.
The Tzemach Committee, chaired by Ministry of Energy
and Water Resources director general Shaul Tzemach, advises
allowing the export of up to 50% of each gas fields reserves.
Globes reported that the partners in Prime Minister
Benjamin Netanyahus new government promised in the
coalition agreements to support government decisions on
energy supplies and decisions and bills that the prime minister will submit to regulate the gas and energy industry.
Environmental, energy, and cost of living organizations,
including the Israel Energy Forum and Israel Yakar Lanu
(Israel is Dear to Us), oppose plans to export natural gas. The
Israel Union for Environmental Defense called on MPs to
oppose gas exports, on the grounds that the Tzemach
Committee relied on overly optimistic forecasts and specula-

53 bidders for Lebanese offshore exploration

A total of 53 energy companies from 25 countries submitted bids in the prequalification stage of Lebanons offshore oil and gas exploration tenders, including oil majors
Chevron and ExxonMobil, Royal Dutch Shell, Russias
Rosneft, Italys ENI, Frances Total and Norways Statoil.
Shell is considering selling its 23% stake in Australias
Woodside Petroleum Ltd., after the latter signed a letter of
intent to acquire 30% of the rights in Israels Leviathan gas
field. Total and ENI both acquired offshore oil and gas
exploration licenses in Cyprus late last year.

Lebanons exclusive economic zone (EEZ) covers 23,000

sq. kms, about the same size as Israels EEZ. The current
tenders are Lebanons first-ever offshore energy exploration
tenders. Interest in the tenders was spiked by Israels
Tamar and Leviathan discoveries and the Aphrodite gasfield
in the Cyprus EEZ.
Israeli oil and gas exploration sources believe that
Lebanon has potential discoveries as large as Israels. Israel
and Lebanon dispute the border between their EEZs,
although the differences are not great.

tive conclusions about the countrys gas reserves. In a document sent to Knesset members, the NPO said that there was
no basis for the claims by energy exploration companies that
there is no economic justification to develop the Leviathan
field without exports.

TAMAR PRODUCTION
Noble Energy announced that the Tamar natural gas field
offshore Israel has been successfully brought online with all
five of the subsea wells now producing at stable rates totalling
300 mln cubic feet per day (MMcf/d). When combined with
existing Mari-B volumes, the total current sales are nearly 500
MMcf/d and are expected to average 700 MMcf/d through the
remainder of the year. Initial sales commenced on March 31 as
natural gas flowed from the field to the Tamar platform and
then to the Ashdod Onshore Terminal.
The development is designed to deliver natural gas rates up
to 1 bln cubic feet per day (Bcf/d). Volumes will likely reach
this maximum capacity during the peak summer demand in
the third quarter this year.
In just over four years from discovery, the Tamar project is
fully operational and delivering significant volumes of natural
gas to Israel.
The gross resource estimate of Tamar has been increased to
10 tcf, up from 9 tcf, as a result of development drilling and
continued reservoir analysis and modeling.

V4 imports reach 70 mln

Imports from the Visegrad V4 Group of Poland, Hungary,
Czech and Slovakia reached 70.2 mln euros last year, with
the embassies and trade delegations of the four countries
hosting an investment forum at the Hilton Hotel in Nicosia
on Friday.
The forum on Secure Amid Crisis, aims to promote
current opportunities and investment ideas in Poland and
the other central European states, focusing on the profitable
and stable financial sector, especially the CEE banking
sector.
Particular emphasis will be placed on the investment
opportunities by the Polish economy, its regional role and
the expansion plans of the Warsaw Stock Exchange, as well
as the privatisation programme of the Polish government.
Information ad participation details are available at
http://investment-forum.exposupport.pl/

April 10 - 16, 2013

4 | CYPRUS | financialmirror.com

6,000 savings withdrawn in March

l

MPs suspend bank list probe, as Deputy CB chief sacked

The House Ways and Means Committee has suspended its

investigation into the withdrawal of at least 6,000 savings
greater than 100,000 euros, because the Central Bank had only
provided data for 15 days prior to the ill-fated Eurogroup meeting that decided on the haircut of deposits.
Committee chairman Demetris Syllouris, leader of the junior
coalition partner European Party (Evroko) said that it was with
great disappointment and anger that, when we opened the envelope, we realised it contained data for only 15 days even though
we had asked for a year. This kind of behaviour is unacceptable.
Underscoring tensions in relations between the central bank
and the one-month-old centre-right government, the govern-

ment also withdrew the appointment of the deputy central bank

governor who supplied the data.
Spyros Stavrinakiss appointment, made by the previous
communist administration just three weeks prior to the elections in February, was based on faulty legal reasoning, the
government said.
Rumours have been rife that depositors had privileged information and whisked their funds out of banks to save them from
a potential haircut on unsecured deposits of over 100,000, casuing the central bank to introduce measures to curb capital flight.
The Democratic Rally party has for months claimed the
needs of the islands now-crippled banking sector were artificial-

ly inflated to divert attention away from fiscal mistakes by the

previous government.
Actions in Cyprus and beyond over recent months resulted
in making the needs of the banks larger ... some people rolled
out the carpet to lead us to this, Finance Minister Harris
Georgiades told state radio.
Syllouris said the ethics committee had requested a list of
who transferred money dating back to a year because it wanted
to look into possible loans given with favourable terms. He
expressed doubt that the list he received, which included the
names of about 6,000 individuals and companies that shifted
money abroad, was complete.

Inflation rate drops

to 1.1% in March

Unemployment climbs
18.3% y/y in March

The impact of the Cyprus economic crisis, in which the

banks were closed for nearly two weeks from March 16th and
bakeries slashed prices of bread and milk to support the desperate seems to have shown up in March inflation figures.
Prices rose by 0.7% over the previous month, mainly
owing to an 8.6% rise in prices of clothing and footwear
items, which had fallen compared with the previous month
by 0.1% in February and 20.7% in January.
The Statistical Service Cystat also reported that prices rose
for certain fresh vegetables and fruit. This might explain why
overall food prices did not fall despite the slashing of bread
and milk prices. Food and non-alcoholic prices in March rose
by 0.7% over the previous month.
The trend is still downwards, however. Compared with
March 2012 the inflation rate fell to 1.1% from 1.6% in
February 2013 and 3.4% in March 2012.
In January-March the inflation rate was 1.5%.

The number of registered unemployed continued to reach

new highs on March, although the pace of increase had begun
to slow compared with previous months.
The number reached 44,283, which was 6,840 or 18.3%
higher than the year earlier, compared with a peak increase of
33.5% in July 2012.
The main increase was in retail and wholesale trade (1,865),
accommodation and food services (1,050), public administration (1,043), manufacturing (538), financial and insurance
activities (391) and construction (352).
Unemployed newcomers to the labour market rose by 301.
Unemployment also rose on a seasonally adjusted to 40,951
compared with 40,567 in the previous month.
Unemployment is expected to climb rapidly in the coming
months as a result of the closure of the second largest bank and
the effective freezing of working capital for Cyprus micro businesses. More than 90% of small businesses in Cyprus have
fewer than ten employees.

Gross earnings up 1.1%

in 2012, but net
probably negative
Gross earnings in Cyprus rose on average by 1.1% to EUR
1,990 per month in 2012, according to Sapienta Economics
calculations based on quarterly figures.
In the fourth quarter, which includes 13th salaries, gross
earnings rose by 0.7% to EUR 2,292, with males earning EUR
2,470 and females earning 15.7% less as EUR 2,082.
The Statistical Service Cystat notes that the deductions
applied to gross earnings in the broad public sector, which
were implemented from the fourth quarter of 2011 and 2012,
do not affect the gross salary of employees but only their net
income.
As a result, while these deductions reduce the disposable
income of employees, they are not reflected in the fluctuation
of gross earnings.
One can conclude from this that net earnings actually
declined in the fourth quarter and for the whole of 2012.
As part of negotiations for a Cyprus bailout, additional
cuts average 10% were made to public-sector net earnings at
the beginning of 2013.

Capital controls undermine confidence

As the government finalized the EU bailout terms and the
IMF said it had reached an initial agreement with Cyprus to
unlock its portion about EUR 1 bln of a EUR 10 bln
bailout for the country, one would expect that the authorities
here would immediately take steps to further relax the capital
movement restrictions.
Contrary to expectations, the authorities decided to
extend the severe capital restrictions for another week, which
in laymans terms means an indefinite period, giving rise to
rumours that the measures will lead to a deposit haircut at
Cooperative Credit Institutions and other banks.
President Nicos Anastasiades and the Central Bank of
Cyprus swiftly quashed the rumours, but most Cypriots are
most likely to believe the rumours rather than their own
president who unfortunately has lost credibility.
Many now believe that Anastasiades made a serious error
when before the Eurogroup meeting he and his now departed
Finance Minister continued to stress that a deposit haircut
was no longer on the agenda and it was a red line that
would be defended at all cost.
After the deposit haircut, who will believe him again? So
despite the President insisting that there would be no haircut
at the Coops or at other banking institutions, the majority of
the public still believes that such a haircut is a possibility,
otherwise why is the Central Bank still maintaining the
crippling capital movement restrictions?
Instead of ring-facing the problem to Bank of Cyprus and
Cyprus Popular Bank, the tough and unjust capital
restrictions imposed on all banks is causing tremendous
hardship for thousands of businesses that are now forced to
curtail operations, proceed with layoffs and even risk closure.
In order to raise money to recapitalize the two ailing
banks, the government decided to close Cyprus Popular Bank
and radically restructure Bank of Cyprus, which in the
process means that CPBs uninsured depositors will probably

take losses of as much as 80% of their holdings over the

guaranteed limit of EUR 100.000 and Bank of Cyprus
depositors stand to incur losses of as much as 60% over the
limit. Meanwhile, the government promised to implement
the bailout agreement leading to spending cuts and tax
increases equal to more than a tenth of our EUR 17 bln a year
economy through 2018.

By Shavasb Bohdjalian
Certified Investment Advisor
and CEO of Eurivex Ltd.
In addition to these measures, the government also
decided to impose capital restrictions covering not only BOC
and CPB, but all other foreign banks as well as healthy local
banks. But if all BOC/CPB deposits exceeding EUR 100.000
are blocked, no deposit at any Cyprus based bank can be
broken and when they mature, only 10% can be withdrawn
and the rest automatically renewed for another month, then
one is justified to ask as to the real purpose of the capital
restrictions imposed on current accounts and if it has been
done deliberately to curtail business activity?
The measures are crippling the rest of the economy and
has resulted in an effective shutdown, which will push
Cyprus economy into a double-digit-percentage (with first
estimates talking of 13%) contraction this year.
Such a depression will lead to another 30.000 people
joining the unemployment ranks this year on top of 40.000
already unemployed, which means all the governments
revenue targets will be missed by a wide margin.
Since President Anastasiades promised civil servants that

there will be no further reductions in salaries even though

in the private sector salaries are being cut from 15% to 50% then its obvious that in most certainty, come September or
even sooner, the Troika will demand additional cost cutting
measures so that Cyprus remains within the stated deficit
targets.
If there will be no additional salary cuts in the civil service
and the ability of the government to raise taxes is restricted
because of the state of the economy, where else will the
government turn to in order to raise the new additional
revenue to qualify for continued Troika funding? This is why
people listen to speculation that the capital restrictions are in
place so that if necessary, they can proceed with a 2nd
deposit haircut, which will be extended to all banks.
If the likes of Eurobank, Hellenic, Piraeus, CDB and USB
as well as the Coops are adequately capitalized and they have
performing loans, which they can pledge to the Central Bank
and secure funding from ELA, then why not lift the
restrictions and allow the remaining banks to resume normal
operations?
The sooner capital controls are lifted, the sooner stability
and confidence will return to Cyprus, otherwise the public
will believe the rumours rather than the people supposedly
running the country.
shavasb@eurivex.com
(Eurivex Ltd. is a Cyprus Investment Firm,
authorized and regulated by CySEC, license #114/10
and approved by the Cyprus Stock Exchange to act
as Nomad and by the Vienna Stock Exchange to act
as Listing Agent for listings of shares, bonds and funds.
The views expressed above are personal
and do not bind the company and are subject
to change without notice)

April 10 - 16, 2013

financialmirror.com | CYPRUS | 5

Its not all doom and gloom: Danish shipping

companies visit Cyprus
l The current economic turmoil has touched everyone on the island. However, its not all doom and gloom
When faced with an economic downturn and challenges,
you have to maintain an outward looking perspective, to
engage, innovate and modernise. To trade and to form
partnerships.
This is why the Danish Embassy in Cyprus is organising a
shipping conference in cooperation with the Cyprus Shipping
Chamber and a visiting delegation from the Danish Marine
Group. We want to send the message that the vibrant
shipping sector in Cyprus generating growth and
employment opportunities is interesting for Danish
companies.
The conference is entitled Operational Efficiency by
Technology and will take place on April 18 at the Carob Mill in
Limassol.
The Danish shipping industry has a long history of close
cooperation with Cyprus and the event underlines that the
shipping industry remains a key sector in the Cypriot

By Ambassador
Kirsten Geelan
Royal Danish Embassy, Nicosia
economy. I am particular pleased with the timing of the
conference and the participation of a number of Danish
companies underlining the resilience of the Cypriot economy
and its continued ability to attract foreign interest.
Advantages in vessel performance as well as energy and
operational effectiveness are important elements for the
shipping sector, and a crucial parameter for operating in a
highly competitive market. We hope that our conference can
contribute with information on how to deal with these

1 bln from British bail-out plan

in property mis-selling
Recent proposals by Maxwell Alves, Solicitors in the City
of London, representing a number of victims of property
mis-selling, have been accelerated in view of the crisis in
Cyprus and in anticipation of what may happen. Under
these proposals the British government will arrange for a
line of credit to British victims of mis-selling which will
allow lump sum settlements to be reached with the Cypriot
banks involved. It will also allow certain other terms to be
imposed to resolve cases which are not purely a loan dispute.
The firm issued an announcement saying Maxwell Alves
have long been lobbying politicians and government agencies and negotiating on behalf of their clients with the banks
and property developers in an effort to resolve these claims
without resorting to litigation.
These matters are just too complicated to resolve by
court action without tears for both sides, explained George
Kounis, the Consultant at Maxwell Alves leading on these
cases but without a facility to motivate the banks to settle
the next step in a lot of these cases is litigation.
In a recently published White Paper and Addendum following the crisis, he reported on the progress of these discussions and the proposed British bail-out. The proposal uses the
draft Heads of Agreement recently submitted to Alpha Bank
Cyprus, after a meeting between Kounis and the Managing
Director of the bank, as the basis of reaching a settlement.

There can be no blanket agreement, explained Kounis.

Each case is different and has to be negotiated separately
within the framework of the Heads of Agreement. The
same proposals were also discussed with the other banks
involved.
The crisis in Cyprus will mean that banks will no longer
have the luxury to wait for their money. In any event,
Maxwell Alves believe that the requirement to clear non-performing loans within 18 months will be a term of the Troika
bail-out.
We are expecting a cull, said George Kounis, and
although banks will be committing suicide by getting stuck
in court battles for years, we still need to protect our clients
and try to lift them out of what is likely to become a war
zone.
For this reason Maxwell Alves are actively seeking the
involvement of the British government and the engagement
of the Cypriot government which will lead to a full and final
resolution of the mis-selling saga and may release more
than 1 bln euros to cash-strapped Cypriot banks.
As soon as the crisis struck, George Kounis met Bill Cash
MP who is co-ordinating an All-Party Parliamentary Group
(APPG) for the Defence of the Interests of British Property
Owners in Cyprus with a view of promoting a bail out by
the British government and agreed to submit proposals for
a British bail-out. These have now been submitted.

East Med Marine to focus

on technical products, services
The East Med Marine Exhibition to be held at the
GrandResort, Limassol on April 11-12, will focus on
Technical Products and Services Exhibition for the Marine
Industry.
The annual event aims to offer the large shipping
community of Cyprus and the Eastern Mediterranean
information on technical equipment / components and new
developments, dry docks and repairs, safety products and
services, automation, navigation and communication
systems, chemicals, lubricants, fuel management systems,
and marine paints.
Some of the exhibitors include marine equipment
manufacturers such as Blohm+Voss Industries, TTS
Group, Hatlapa Marine Equipment, Zeppelin Power
Systems, shipyards such as Blohm+Voss Repairs, Navantia
Group, BLRT Group.

The Exhibition is held under the auspices of the

Minister of Communication and Works and is supported
by the Municipality of Limassol, the Cyprus Shipping
Chamber, the Department of Merchant Shipping and the
Institute of Marine Engineering, Science & Technology
(IMarEST).
East Med Marine Exhibition is being organised by the
MIE Group Ltd. that has offices in Cyprus, Greece, Dubai
and China, while the organisation and promotion is being
handled by Thoosa Events Ltd.
The Minister of Communication and Works, Tasos
Mitsopoulos, will inaugurate the exhibition at 4pm on
Thursday, April 11, and the exhibition will be open to the
public on both days from 4 to 9pm.
For information contact Elena Panayiotou-Antoniou,
e.panayiotou@thoosa.cy.net. / www.eastmedexpo.com

challenges presently and onwards.

Shipping is a Danish stronghold and Danish companies
and the expertise and knowhow, they represent remain at the
forefront of the most advanced segments of the global
shipping industry. The importance of Danish shipping is best
illustrated by the fact that the fleet operated by Danish
shipping companies transports approximately 10% of all
globally traded goods.
In Cyprus, shipping contributes over 5% of the GDP for
ship management and 7% of the GDP for ship owning while
employing 4,500 people. I see the potential for further
growth.
Denmark has more than 400 islands and like Cyprus is a
seafaring nation hosting two of the largest merchant fleets in
the world. We may be small in size and population but that is
exactly why we have maintained an open economy and
outward looking perspective.

April 10 - 16, 2013

6 | OPINION | financialmirror.com

How about some Thatcheromics, Mr. President?

EDITORIAL
As controversial as she was, Margaret Thatchers greatest legacy is undoubtedly her determination to excel and
her extreme sense of patriotism. She transformed a labourintensive economy that was destined for doom to an entrepreneurial society that enjoyed unprecedented growth, she
reformed and privatised the underproductive utilities and
transformed a greater part of the public into stakeholders,
she provided the concept of home ownership to hundreds
of thousands of council residents, who then capitalised on
their mortgages to fund their small businesses, the cornerstone of the British economy today.
What, then, should Mr. Anastasiades learn from
Baroness Thatcher, a true inspiration for the 80s and 90s
generations of entrepreneurs?
First and foremost: fear no one, least of all the bloodsucking trade unions that are so entrenched into our
Cypriot culture that no politician dares to challenge their
hegemony. This is why we could not lower public spending
all these years that has brought us to the current econom-

ic demise. This is why no one dares call the bluff of the

Cyprus Airways staff who have rollicked in endless benefits, when the airline should have closed down ages ago.
This is why civil servants, bank employees and teachers
look at their watches, eager to go home to a secure paycheck, with no one telling them anything about a sense of
duty to the community.
President Anastasiades has been given a grace period of
40 days, as much as a mourner needs to overcome a tragic loss. The loss in this case was the criminal inheritance
from a five-year incompetent communist administration
that has demolished the entrepreneurial spirit of every
Cypriot. Scorched earth indeed.
Now is the time for Mr Anastasiades to push through
the immediate privatisation of all productive and profitable
services, so that Cyprus can once again regain its competitiveness in the international business scene. All others
should be shut down to contain further losses on the private-sector taxpayer who is the only one carrying the heavy
burden of the ECB-sanctioned austerity bailout.
Taking a page out of the Iron Ladys workbook, the
President should also kindly ask that all quango presidents tender their resignations and be replaced by younger

and more dynamic leaders to take the semi-government

organisations and boards into a new age of dynamism,
challenge and maybe even confrontation. The telco Cyta
should be headed by a thirty-something Internet whizz kid,
the EAC needs a solar operator at its helm and the Cyprus
Tourism Organisation must have a chairperson from
among the ranks of the most successful salespeople from
the travel industry, preferably a woman who can drive a
bargain much better than her male counterparts.
The experiment of subsidising the low-cost airlines
such as Ryanair and Easyjet was a miserable failure. If the
Flying Moufflon cannot handle the competition and is dead
against giving up the few monopolies it has left, then perhaps it should be replaced by another airline that is willing
to sell seats and promote Cyprus to attract the quality
tourism golden egg that was never hatched.
So, Mr Anastasiades. Roll up your sleeves and get down
to work. Mrs Thatcher would expect nothing less from you.
And while youre at it, how about finding a central
banker that really wants the economy to prosper and grow,
and not be strangled by the stupid credit controls imposed
by the ECB that no-one in the Central Bank of Cyprus dares
to challenge.

Investment incentives need to create

high-skilled (Cypriot) jobs
A number of ideas have been doing the rounds for attracting
new investment into Cyprus.
There will inevitably be a temptation to go for the quick
buckmop up all of that extra housing stock by offering citizenship and or residency to Chinese citizens for only a little bit of
investment.
This will admittedly fix a short-term issue, namely problem
loans taken out by overstretched real estate developers and owed
to fragile banks.
But it will not fix the much longer-term problem, namely the
disappearance overnight of opportunities for young, educated
Cypriots.
The decimation of our only two growth sectors (financial and
business services) means that young Cypriots will be suffering at
Greek-sized unemployment rates in a year or so.
This is why we need to do something to boost the employment of young, skilled labour.
According to Eurostat, Cyprus has the highest tertiary educational attainment rate in the EU for 15-64 year-olds, at 34.8% and
one of the highest for the young.
This is a massive pool of talent. But the jobs they used to take
as accountants, lawyers, bankers and, yes, public servants, have
now disappeared.
There are around 8,500 Cypriot students currently in the UK
and around 9,000 or so in Greece.
If the ones in the UK stay and the ones in Greece emigrate
north, we shall have lost an entire generation that might just be
able to think differently than the one that got us into this mess in

FinancialMirror
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By Fiona Mullen
Director, Sapienta Economics Ltd

the first place.

So here are a couple of ideas. As usual, I like to attribute the
sources of my ideas, so this one comes from Stavros Zenios at the
University of Cyprus.
Keep the citizenship and residency thresholds the same for a
simple bank deposit or purchase of real estate. But drop them if
the investor also creates, say, 50 high-skilled jobs for the young.
EU rules have a lot of state-aid exemptions for job-creation, so
I doubt that this will be a problem.
In my view it is important that these jobs be highly skilled, by
which I mean jobs for Cypriot graduates.
You might attack me for discrimination. But if Cypriots are to
survive this calamity they have to do something for the young

and the hopeful. Otherwise we cannot be complacent that this

generally peaceful populace will never go the way of Greece.
We also need to find ways that do not depend on bank financing. The three largest lenders (Bank of Cyprus, Laiki and the
cooperatives) account for more than 70% of local lending.
While sorting out their capital positions they will not be in a
position to lend. So we shall, in essence, have an economy that
has to survive on no new credit for a number of years.
This leads me to the second idea, this time from Marina
Theodotou of Curveball Ltd, namely to use our connections with
Israel to help us attract venture capital that takes advantage of our
highly skilled workforce. Venture capital, by definition, does not
depend on bank financing.
We have the accounting skills for venture capital investment,
we have the sun to reduce our dependence on imported oil. We
even have the hi-tech skills, sometimes going unused behind a
government desk.
Mesh these together, with incentives for job-creation, and you
have an attractive investment proposition.
The three of us have plenty more ideas. Is there anyone out
there listening?

UCy students
at Imagine Cup
Students from the University of Cyprus are taking
part in the annual Imagine Cup hosted by Microsoft in
St Petersburg in July, where they will present their
Near Field Care application that aims to replace the
MedicAlert bracelet for high-risk patients by using
smartphone technologies. The Cypriot team, Nudge
From Cyprus, will use the event for networking and
exchange of information, as well as to aim for the
$50,000 top prize. They have been planning fro the
event since last where students, led by mentors from
the academia, have been working to create applications as part of the Dream it. Build it. Live it theme
by Microsoft. Follow them at www.imaginecup.com

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April 10 - 16, 2013

financialmirror.com | COMMENT | 7

Europes Perpetual Crisis

The Cyprus bailout deal is a watershed in the unfolding eurozone
crisis, because responsibility for resolving banks problems has been
shifted from taxpayers to private investors and depositors. But imposing major losses on Cypriot banks depositors violates the depositinsurance guarantee that forms part of the proposed European banking union, while the imposition of capital controls further erodes the
monetary unions foundations. So, is Europe chasing its tail?
Germany and the other countries of the eurozone core are signaling that debt mutualization within the monetary union is out of the
question, and that bailouts of countries or financial institutions will be
balanced by bail-ins of their creditors. Increased uncertainty concerning the safety of deposits will push up interest rates and deepen
Europes recession, and may also trigger capital outflows from the
eurozones weaker peripheral economies to the core.
The implications of this shift may be far-reaching. The German
model for resolving the debt crisis and returning to internal or external balance relies on fiscal consolidation and structural reforms for the
deficit countries. But, if all countries simultaneously attempt to
improve their fiscal or external balances by cutting spending and raising taxes, all will fail, because each countrys austerity implies less
demand for other countries output, in turn perpetuating both
domestic and external imbalances. Bailing in creditors will exacerbate these trends.
Moreover, a deep and prolonged recession implies vanishing support for reforms, as governments fail to convince citizens that current
sacrifice will ensure a better future. Privatization, market liberalization, the opening of closed professions, and government downsizing
involve conflicts with powerful vested interests, such as businesses in
protected industries, public-sector unions, or influential lobbies.
Resolving such conflicts requires social alliances, which are invariably
undermined by discontent, civil disorder, and political instability.
The recent Italian election has shown how toxic the association of
austerity policies with the pursuit of reform has become. Anti-austerity anger swept away the reform agenda of Mario Montis previous
technocratic government, leaving Italy, its future uncertain, to continue muddling through. The same scenario seems to be emerging in
Greece, where the depth of the austerity-induced recession, with out-

put down by 25% over five years and unemployment at 27%, is paralyzing a reform-minded center-right government.
The gaps in the strategy are clear. First, the eurozone authorities
misread the real causes of the debt crisis, which stemmed mainly
from a growing competitiveness gap between the core and periphery
countries. The resulting private-sector imbalances culminated in
banking problems that were eventually transferred to sovereigns.
Greeces fiscal profligacy was the exception rather than the rule.
Indeed, in contrast to the United States, eurozone authorities were
slow to consolidate the banking system after the global financial crisis

By Yannos Papantoniou
erupted in 2008, and failed to sever the ties between sovereigns and
banks balance sheets. Nor did they push strongly for structural
reforms. Instead, they emphasized harsh austerity, which was to be
pursued everywhere.
Second, the effects of austerity were exacerbated by the choice to
pursue nominal, rather than structural, fiscal-deficit targets.
Countries with a stronger fiscal position (that is, smaller structural
deficits) should be encouraged to adopt more expansionary policies in
order to contribute to lifting overall demand. Moreover, the European
Investment Banks lending capacity could be increased substantially,
and European Union structural funds mobilized, to finance investment projects in the peripheral economies.
Third, the European Central Banks announcement last August of
its outright monetary transactions program through which it
guarantees eurozone members sovereign debt, subject to policy conditionality has contributed significantly to subduing financial turbulence in the eurozone. But the OMT scheme has not been reinforced
by a reduction in key interest rates, which would boost inflation in
core countries with external surpluses and thus help to close the com-

petitiveness gap with the periphery. Crucially, monetary-policy measures do not address the underlying problem of lack of demand.
Last, but not least, the eurozone authorities misread the confidence factor. In theory, simultaneous fiscal consolidation and supplyside reform facilitates economic recovery, because it increases confidence among consumers and investors, thereby inducing higher
spending and production. But this does not necessarily work in an
imperfectly functioning monetary union, such as the eurozone,
where the continual appearance of systemic flaws erodes confidence;
in such circumstances, the result may be hoarding and capital outflows, rather than increased spending.
The eurozones flaws reflect its conceptual distance from the US,
which is the only model of a well-functioning monetary union.
Europes history rules out emulating the US model. But, to make the
eurozone work, monetary unification should extend to the fiscal and
financial fields, thereby creating an integrated economic union.
The longer that European authorities postpone the introduction of
Eurobonds, an effective banking and fiscal union, and lender-of-lastresort status for the ECB, the longer the crisis will last. By effectively
defaulting on a deposit-insurance guarantee through its actions in
Cyprus, the eurozone backtracked on the planned banking union.
Pursuing a strategy that simultaneously deepens recession and
weakens confidence will not resolve the debt crisis. As funding problems recur in the recession-hit economies, governments may resist
bailing in and the associated losses. Civil unrest and political destabilization could erupt into financial and social crises that ultimately
threaten the monetary unions survival.
In short, the solution to the Cyprus crisis is no solution at all for
the eurozone. Unless the authorities embrace a growth strategy and
do so quickly the eurozones prospects will become increasingly
bleak.
Yannos Papantoniou, a former economy and finance minister
of Greece (1994-2001), is President of the Center
for Progressive Policy Research.
Project Syndicate, 2013.
www.project-syndicate.org

April 10 - 16, 2013

8 | COMMENT | financialmirror.com

The Promise of Abenomics

Japanese Prime Minister Shinzo Abes program for his
countrys economic recovery has led to a surge in domestic
confidence. But to what extent can Abenomics claim credit?
Interestingly, a closer look at Japans performance over the
past decade suggests little reason for persistent bearish
sentiment. Indeed, in terms of growth of output per employed
worker, Japan has done quite well since the turn of the century.
With a shrinking labor force, the standard estimate for Japan in
2012 that is, before Abenomics had output per employed
worker growing by 3.08% year on year. That is considerably
more robust than in the United States, where output per
worker grew by just 0.37% last year, and much stronger than in
Germany, where it shrank by 0.25%.
Nonetheless, as many Japanese rightly sense, Abenomics
can only help the countrys recovery. Abe is doing what many
economists (including me) have been calling for in the US and
Europe: a comprehensive program entailing monetary, fiscal,
and structural policies. Abe likens this approach to holding
three arrows taken alone, each can be bent; taken together,
none can.
The new governor of the Bank of Japan, Haruhiko Kuroda,
comes with a wealth of experience gained in the finance
ministry, and then as President of the Asian Development
Bank. During the East Asia crisis of the late 1990s, he saw
firsthand the failure of the conventional wisdom pushed by the
US Treasury and the International Monetary Fund. Not wedded
to central bankers obsolete doctrines, he has made a
commitment to reverse Japans chronic deflation, setting an
inflation target of 2%.
Deflation increases the real (inflation-adjusted) debt burden,
as well as the real interest rate. Though there is little evidence
of the importance of small changes in real interest rates, the
effect of even mild deflation on real debt, year after year, can be
significant.
Kurodas stance has already weakened the yens exchange
rate, making Japanese goods more competitive. This simply
reflects the reality of monetary-policy interdependence: if the
US Federal Reserves policy of so-called quantitative easing
weakens the dollar, others have to respond to prevent undue
appreciation of their currencies. Someday, we might achieve

closer global monetary-policy coordination; for now, however,

it made sense for Japan to respond, albeit belatedly, to
developments elsewhere.
Monetary policy would have been more effective in the US
had more attention been devoted to credit blockages for
example, many homeowners refinancing problems, even at
lower interest rates, or small and medium-size enterprises lack
of access to financing. Japans monetary policy, one hopes, will
focus on such critical issues.

By Joseph E. Stiglitz

But Abe has two more arrows in his policy quiver. Critics
who argue that fiscal stimulus in Japan failed in the past
leading only to squandered investment in useless infrastructure
make two mistakes. First, there is the counterfactual case:
How would Japans economy have performed in the absence of
fiscal stimulus? Given the magnitude of the contraction in
credit supply following the financial crisis of the late 1990s, it
is no surprise that government spending failed to restore
growth. Matters would have been much worse without the
spending; as it was, unemployment never surpassed 5.8%, and,
in throes of the global financial crisis, it peaked at 5.5%. Second,
anyone visiting Japan recognizes the benefits of its
infrastructure investments (America could learn a valuable
lesson here).
The real challenge will be in designing the third arrow, what
Abe refers to as growth. This includes policies aimed at
restructuring the economy, improving productivity, and
increasing labor-force participation, especially by women.
Some talk about deregulation a word that has rightly
fallen into disrepute following the global financial crisis. In fact,
it would be a mistake for Japan to roll back its environmental
regulations, or its health and safety regulations.
What is needed is the right regulation. In some areas, more

active government involvement will be needed to ensure more

effective competition. But many areas in which reform is
needed, such as hiring practices, require change in privatesector conventions, not government regulations. Abe can only
set the tone, not dictate outcomes. For example, he has asked
firms to increase their workers wages, and many firms are
planning to provide a larger bonus than usual at the end of the
fiscal year in March.
Government efforts to increase productivity in the service
sector probably will be particularly important. For example,
Japan is in a good position to exploit synergies between an
improved health-care sector and its world-class manufacturing
capabilities, in the development of medical instrumentation.
Family policies, together with changes in corporate labor
practices, can reinforce changing mores, leading to greater (and
more effective) female labor-force participation. While Japanese
students rank high in international comparisons, a widespread
lack of command of English, the lingua franca of international
commerce and science, puts Japan at a disadvantage in the
global marketplace. Further investments in research and
education are likely to pay high dividends.
There is every reason to believe that Japans strategy for
rejuvenating its economy will succeed: the country benefits
from strong institutions, has a well-educated labor force with
superb technical skills and design sensibilities, and is located in
the worlds most (only?) dynamic region. It suffers from less
inequality than many advanced industrial countries (though
more than Canada and the northern European countries), and
it has had a longer-standing commitment to environment
preservation.
If the comprehensive agenda that Abe has laid out is
executed well, todays growing confidence will be vindicated.
Indeed, Japan could become one of the few rays of light in an
otherwise gloomy advanced-country landscape.
Joseph E. Stiglitz, a Nobel laureate in economics,
is University Professor at Columbia University.
Project Syndicate, 2013.
www.project-syndicate.org

Abenomics and Asia

SEOUL Japanese Prime Minister Shinzo Abes economic
agenda dubbed Abenomics seems to be working for his
country. Expansionary monetary policy is expected to inject liquidity into the Japanese economy until inflation hits the Bank of
Japans 2% target, while expansionary fiscal policy is expected to
continue until economic recovery takes hold.
As a result, consumer and investor confidence is returning.
The Japanese stock market has soared more than 40% since
November of last year, when it became clear that Abe would
form the next government, and exports and growth are also
picking up. With a large output gap and low inflationary pressure, expansionary policies show great potential for reviving economic activity.
But other countries including neighboring Asian
economies fear that Japan is devaluing the yen to bolster
exports and growth at their expense. Some have accused Japan
of fueling a global currency war. Anticipation of aggressive
monetary expansion has sharply weakened the yen, which has
fallen by almost 20% against the dollar in just over four months.
Of course, Japans escape from its 15-year deflationary trap
and two decades of economic stagnation would be good for the
world. Japan remains the worlds third-largest economy, the
fourth-largest trader, and the third-largest export market for
neighboring China and South Korea, which thus stand to benefit if Abenomics revitalizes Japanese domestic demand. More
broadly, given Europes slide into recession and only a slow rise
in world trade volume, renewed growth and stronger import
demand in Japan would support global recovery.
The question now is whether Abenomics can achieve its
goals without destabilizing the world economy, especially
neighboring Asian economies. Doing so requires Japanese policymakers to focus on more sustainable growth while averting
a vicious cycle of competitive devaluation and protectionism
with Japans trade partners. In particular, expansionary monetary and fiscal policies which are helpful in the short term
must be accompanied by fundamental structural reforms.
Japans deflation and economic stagnation over the last two
decades stemmed largely from a dysfunctional financial system and a lack of private demand. The collapse of asset bub-

bles in the 1990s left Japans financial system and private sector saddled with a huge debt overhang. Recovery began only
after the balance-sheet weaknesses in the financial, household,
and corporate sectors were addressed. Sustainable growth
requires sustained private-sector demand.
Monetary easing and fiscal stimulus, combined with structural measures to restore private firms to financial health,
would stimulate household expenditure and business invest-

By Lee Jong-Wha

ment. Indeed, the impact of real exchange-rate depreciation on

growth is likely to be short-lived unless increased corporate
profits in the export sector lead to higher household consumption and investment. And yet risks to financial and fiscal stability could arise if higher inflation and currency depreciation
were to spoil investors appetite for Japanese government
bonds, thereby pushing up nominal interest rates.
That is why the success of Abenomics hinges not on the
short-term stimulus provided by aggressive monetary expansion and fiscal policies, but on a program of structural reform
that increases competition and innovation, and that combats
the adverse effects of an aging population.
Japan, of course, is not alone in using exchange-rate policies to keep exports competitive. Many emerging economies
authorities intervene in currency markets to prevent
exchange-rate appreciation and a loss of export competitiveness. But if Japan starts to intervene directly in global currency markets to ensure a weaker yen, neighboring competitors
will respond in kind. The danger of a currency war and protectionism should not be underestimated.
In South Korea, the government and business leaders
worry that a stronger won, which recently rose to its highest

level against the yen since August 2011, will hurt key export
sectors, including automobiles, machinery, and electronics.
One report by a Korean research institute shows that the
Korean economy will slip into recession if the yen-dollar
exchange rate nears 118, its average level back in 2007.
Moreover, unlimited quantitative easing by the Bank of
Japan, the Federal Reserve, and the European Central Bank
also increases the risk of volatile capital flows and asset bubbles
in Asian emerging economies. Chinese policymakers have
raised serious concerns about the growing risks of inflation
and property bubbles.
This delicate situation could escalate into further currency
intervention, trade protectionism, and capital controls.
Beggar-thy-neighbor policies could lower total trade volume
a zero-sum game from which no one would benefit. After all,
Japanese exports rely on emerging and developing markets,
with East Asia alone accounting for nearly half of Japans foreign sales.
The regional economy would benefit from closer coordination of exchange-rate and monetary policies. Mechanisms like
the G-20 and ASEAN+3 (ASEAN, with China, Japan, and
South Korea) should be used more actively for policy dialogue
and surveillance. East Asian economies could then, over time,
cooperate to enhance regional exchange-rate stability, thereby
creating a more conducive environment for intra-regional
trade.
Japans economy is moving at last, which bodes well for
Asia and the world. But, despite its new vigor, the benefits of
recovery could prove to be short-lived unless a sustainable and
cooperative growth path is found.
Lee Jong-Wha, Professor of Economics at Korea University,
served as Chief Economist and Head of the Office of
Regional Economic Integration at the Asian Development
Bank and was a senior advisor for international economic
affairs to former president Lee Myung-bak of South Korea.
Project Syndicate, 2013.
www.project-syndicate.org

April 10 - 16, 2013

financialmirror.com | COMMENT | 9

The Long Mystery of Low Interest Rates

As policymakers and investors continue to fret over the risks
posed by todays ultra-low global interest rates, academic economists continue to debate the underlying causes. By now, everyone accepts some version of US Federal Reserve Chairman Ben
Bernankes statement in 2005 that a global savings glut is at the
root of the problem. But economists disagree on why we have the
glut, how long it will last, and, most fundamentally, on whether
it is a good thing.
Bernankes original speech emphasized several factors some
that decreased the demand for global savings, and some that
increased supply. Either way, interest rates would have to fall in
order for world bond markets to clear. He pointed to how the
Asian financial crisis in the late 1990s caused the regions voracious investment demand to collapse, while simultaneously
inducing Asian governments to stockpile liquid assets as a hedge
against another crisis. Bernanke also pointed to increased retirement saving by aging populations in Germany and Japan, as well
as to saving by oil-exporting countries, with their rapidly growing
populations and concerns about oil revenues in the long term.
Monetary policy, incidentally, did not feature prominently in
Bernankes diagnosis. Like most economists, he believes that if
policymakers try to keep interest rates at artificially low levels for
too long, eventually demand will soar and inflation will jump. So,
if inflation is low and stable, central banks cannot be blamed for
low long-term rates.
In fact, I strongly suspect that if one polled investors, monetary policy would be at the top of the list, not absent from it, as
an explanation of low global long-term interest rates. The fact
that so many investors hold this view ought to make one think
twice before absolving monetary policy of all responsibility.
Nevertheless, I share Bernankes instinct that, while central banks
do set very short-term interest rates, they have virtually no influence over long-term real (inflation-adjusted) rates, other than a
modest effect through portfolio management policies (for example, quantitative easing).

A lot has changed since 2005. We had the financial crisis, and
some of the factors cited by Bernanke have substantially reversed.
For example, Asian investment is booming again, led by China.
And yet global interest rates are even lower now than they were
then. Why?
There are several competing theories, most of them quite elegant, but none of them entirely satisfactory. One view holds that
long-term growth risks have been on the rise, raising the premium on assets that are perceived to be relatively safe, and raising

By Kenneth Rogoff

precautionary saving in general. (Of course, no one should think

that any government bonds are completely safe, particularly from
inflation and financial repression.) Certainly, the 2008 financial
crisis should have been a wakeup call to proponents of the Great
Moderation view that long-term volatility has fallen. Many studies suggest that it is becoming more difficult than ever to anchor
expectations about long-term growth trends. Witness, for example, the active debate about whether technological progress is
accelerating or decelerating. Shifting geopolitical power also
breeds uncertainty.
Another class of academic theories follows Bernanke (and,
even earlier, Michael Dooley, David Folkerts-Landau, and Peter
Garber) in attributing low long-term interest rates to the growing
importance of emerging economies, but with the major emphasis on private savings rather than public savings. Because emerging economies have relatively weak asset markets, their citizens
seek safe haven in advanced-country government bonds. A relat-

ed theory is that emerging economies citizens find it difficult to

diversify the huge risk inherent in their fast-growing but volatile
environments, and feel particularly vulnerable as a result of weak
social safety nets. So they save massively.
These explanations have some merit, but one should recognize that central banks and sovereign wealth funds, not private
citizens, are the players most directly responsible for the big savings surpluses. It is a strain to think that governments have the
same motivations as private citizens.
Besides, on closer inspection, the emerging-market explanation, though convenient, is not quite as compelling as it might
seem. Emerging economies are growing much faster than the
advanced countries, which neoclassical growth models suggest
should push global interest rates up, not down.
Similarly, the integration of emerging-market countries into
the global economy has brought with it a flood of labor.
According to standard trade theory, a global labor glut ought to
imply an increased rate of return on capital, which again pushes
interest rates up, not down.
Surely, any explanation must include the global constriction
of credit, especially for small and medium-size businesses.
Tighter regulation of lending standards has shut out an important source of global investment demand, putting downward
pressure on interest rates.
My best guess is that when global uncertainty fades and global growth picks up, global interest rates will start to rise, too. But
predicting the timing of this transition is difficult. The puzzle of
the global savings glut may live on for several years to come.
Kenneth Rogoff, a former chief economist of the IMF,
is Professor of Economics and Public Policy
at Harvard University.
Project Syndicate, 2013.
www.project-syndicate.org

Indias Patently Wise Decision

The Indian Supreme Courts refusal to uphold the patent on
Gleevec, the blockbuster cancer drug developed by the Swiss
pharmaceutical giant Novartis, is good news for many of those in
India suffering from cancer. If other developing countries follow
Indias example, it will be good news elsewhere, too: more money
could be devoted to other needs, whether fighting AIDS, providing education, or making investments that enable growth and
poverty reduction.
But the Indian decision also means less money for the big
multinational pharmaceutical companies. Not surprisingly, this
has led to an overwrought response from them and their lobbyists: the ruling, they allege, destroys the incentive to innovate,
and thus will deal a serious blow to public health globally.
These claims are wildly overstated. In both economic and
social-policy terms, the Indian courts decision makes good
sense. Moreover, it is only a localized effort at rebalancing a global intellectual-property (IP) regime that is tilted heavily toward
pharmaceutical interests at the expense of social welfare. Indeed,
there is a growing consensus among economists that the current
IP regime actually stifles innovation.
The impact of strong IP protection on social welfare has long
been considered ambiguous. The promise of monopoly rights
can spur innovation (though the most important discoveries, like
that of DNA, typically occur within universities and governmentsponsored research labs, and depend on other incentives). But
there often are serious costs as well: higher prices for consumers,
the dampening effect on further innovation of reducing access to
knowledge, and, in the case of life-saving drugs, death for all who
are unable to afford the innovation that could have saved them.
The weight given to each of these factors depends on circumstances and priorities, and should vary by country and time.
Advanced industrialized countries in earlier stages of their development benefited from faster economic growth and greater social
welfare by explicitly adopting weaker IP protection than is
demanded of developing countries today. Even in the United
States, there is growing concern that so-called hold-up patents
and me-too patents and the sheer thicket of patents, in which
any innovation is likely to become entangled in someone elses IP
claims are diverting scarce research resources away from their
most productive uses.
India represents only about 1-2% of the global pharmaceutical
market. But it has long been a flashpoint in battles over expan-

sion of pharmaceutical companies global IP rights, owing to its

dynamic generics industry and its willingness to challenge patent
provisions both domestically and in foreign jurisdictions.
The revocation of patent protection for medicines in 1972
greatly expanded access to essential medicines, and led to the
growth of a globally competitive domestic industry that is often
called the pharmacy of the developing world. For example, production of anti-retroviral drugs by Indian generic manufacturers
such as Cipla has reduced the cost of life-saving AIDS treatment
in Sub-Saharan Africa to just 1% of the cost a decade ago.

By Arjun Jayadev and

Joseph E. Stiglitz
Much of this globally valuable capacity was built under a
regime of weak in fact, non-existent protection for pharmaceutical patents. But India is now bound by the World Trade
Organizations TRIPS agreement, and has revised its patent laws
accordingly, causing widespread anxiety in the developing world
about the implications for global provision of affordable medicines.
Indeed, the Gleevec decision is still only a small reversal for
Western pharmaceuticals. Over the last two decades, lobbyists
have worked to harmonize and strengthen a far stricter and globally enforceable IP regime. As a result, there are now numerous
overlapping protections for pharmaceutical companies that are
very difficult for most developing countries to contest, and that
often pit their global obligations against their domestic obligations to protect their citizens lives and health.
According to the Indian Supreme Court, the countrys
amended patent law still places greater weight on social objectives than in the US and elsewhere: the standards of non-obviousness and novelty required to obtain a patent are stricter
(especially as they pertain to medicines), and no evergreening
of existing patents or patent protection for incremental followup innovations is allowed. The court thus reaffirmed Indias
primary commitment to protecting its citizens lives and health.

The decision also highlighted an important fact: Despite its

severe limitations, the TRIPS agreement does have some (rarely
used) safeguards that give developing countries a certain degree
of flexibility to limit patent protection. That is why the pharmaceutical industry, the US, and others have pushed since its
inception for a wider and stronger set of standards through addon agreements.
Such agreements would, for example, limit opposition to
patent applications; prohibit national regulatory authorities from
approving generic medicines until patents have expired; maintain data exclusivity, thereby delaying the approval of biogeneric drugs; and require new forms of protection, such as
anti-counterfeiting measures.
There is a curious incoherence in the argument that the
Indian decision undermines property rights. A critical institutional foundation for well-functioning property rights is
an independent judiciary to enforce them. Indias Supreme
Court has shown that it is independent, interprets the law
faithfully, and does not easily succumb to global corporate
interests. It is now up to the Indian government to use the
TRIPS agreements safeguards to ensure that the countrys intellectual-property regime advances both innovation and public
health.
Globally, there is growing recognition of the need for a more
balanced IP regime. But the pharmaceutical industry, trying to
consolidate its gains, has been pushing instead for an ever
stronger and more imbalanced IP regime. Countries considering
agreements like the Trans-Pacific Partnership or bilateral partnership agreements with the US and Europe need to be aware
that this is one of the hidden objectives. What are being sold as
free-trade agreements include IP provisions that could stifle
access to affordable medicines, with a potentially significant
impact on economic growth and development.
Arjun Jayadev is a professor of economics at the University of
Massachusetts Boston and a co-editor of the Journal of
Globalization and Development. Joseph Stiglitz is University
Professor, Columbia University, and the author of The Price of
Inequality: How Our Divided Society Endangers Our Future.
Project Syndicate, 2013.
www.project-syndicate.org

April 10 - 16, 2013

10 | COMMENT | financialmirror.com

The Global Growth Quest

Cyprus needs to develop growth after unsustainable surge. But it will take a long time
to overcome the immediate shock of crisis and revamp growth models
NEWPORT BEACH What is the most urgent economic priority shared by countries as diverse as Brazil, China, Cyprus,
France, Greece, Iceland, Ireland, Korea, Portugal, the United
Kingdom, and the United States?
It is not debt and deficits; and it is not dealing with the aftermath of irresponsible lending and borrowing. Yes, these are relevant and, in a handful of cases, urgent. But the number one
challenge facing these countries is to develop growth models
that can provide more ample, well-paid, and secure jobs amid a
secular re-alignment of the global economy.
For both theoretical and practical reasons, this is a challenge
that will not be met easily or quickly. And, when it is met, the
process will most likely be partial and uneven, accentuating differences and posing tricky coordination issues at the national,
regional, and global levels.
The last few years have highlighted the declining potency of
long-standing growth models. Some countries (for example,
Greece and Portugal) relied on debt-financed government
spending to fuel economy activity. Others (think Cyprus,
Iceland, Ireland, the UK, and the US) resorted to unsustainable
surges in leverage among financial institutions to fund privatesector activities, sometimes almost irrespective of underlying
fundamentals. Still others (China and Korea) exploited seemingly limitless globalization and buoyant international trade to capture growing market shares. And a final group rode Chinas
coattails.
Recent data from the International Monetary Fund highlight
these models simultaneous loss of effectiveness. Global growth
averaged only 2.9% in the most recent five-year period, well
below the level for virtually any such multi-year period going
back to 1971. While emerging economies have out-performed
developed countries, both have slowed. Growth has been virtually flat in developed economies and, at 5.6% in the emerging
world, is well below the 7.6% average in the previous five-year
period.
Highly leveraged systems in finance-dependent economies
were the first to hit a wall, surprising many who had uncritically bought into the Great Moderation the idea that macroeconomic and asset-market volatility had eased permanently. The
bold policy action that countered the initial disorder prevented a
global depression, but it encumbered public-sector balance
sheets.
As a result, highly indebted governments were the next to hit
the wall. Some were pushed there by the high cost of containing the damage from banks irresponsible behavior. Facing
immediate credit rationing and large output contractions, they

could be stabilized only by exceptional official financing from

abroad, and, in some extreme cases, by defaulting on past commitments (including to bondholders and, most recently, bank
depositors).
For other countries, including the US, medium-term issues
came to the fore. But, rather than catalyzing sensible policy discussions, these issues played into polarized and polarizing politics, creating new and more immediate headwinds to economic
growth.

By Mohamed A. El-Erian

Meanwhile, a highly interdependent and (now) less dynamic

world economy has been limiting the scope for external growth
drivers. Accordingly, even countries with sound balance sheets
and manageable leverage have experienced a growth slowdown.
The consequences have become painfully clear, especially in
Western countries. With insufficient growth to deleverage safely, social costs have been considerable. Alarmingly high youth
unemployment, shrinking social safety nets, and under-investment in infrastructure and human capital are burdening current
generations and, in a growing number of cases, will adversely
affect future generations as well.
In the process, inequality has risen further. And yet, despite
the urgent need for major policy adaptations at the national
level, and much better regional and global coordination,
progress has been disappointing.
With the political context undermining the right mix of
short- and longer-term measures, national policymaking has
stumbled into partial approaches and unusual experimentation.
The focus has been on buying time, rather than on implementing a sensible transition to a sustainable policy stance. And
potential national outcomes would be less uncertain if excessive
inequality were not treated as an afterthought.
The regional and multilateral dimensions are similarly inadequate. The absence of well-articulated common analyses and
policy coordination has accentuated legitimacy deficits, encouraging leaders and publics to opt for partial narratives and eroding confidence in existing institutional structures.
Given these trends, the search for more robust growth mod-

els will take much longer and be more complicated than many
recognize especially as the world economy pivots away from
unfettered globalization and high levels of leverage.
We should expect countries like the US to benefit from
dynamic bottom-up entrepreneurship and traditional cyclical
economic healing. Notwithstanding a dysfunctional Congress,
the private sector will increasingly convert a paralyzing uncertainty premium, which impedes much investment, into a less
disruptive risk premium. But, without a short-term economic
turbo-charger, the recovery in growth and jobs will remain gradual, vulnerable to political and policy risks, and disproportionately beneficial to those with favorable initial endowments of wealth
and globalized talents.
Governments role will be different in countries like China,
where officials will guide a shift from dependence on external
sources of growth to more balanced demand. As this requires
some fundamental domestic re-alignments, the rebalancing will
be both gradual and non-linear at times.
The outlook for other economies is more uncertain.
Undermined by a lack of policy flexibility, it will take a long time
for countries like Cyprus to overcome the immediate shock of
crisis and revamp their growth models.
Left to their own devices, these multi-speed dynamics would
translate into higher global growth overall, coupled with larger
internal and cross-country disparities often exacerbated by
demographics. The question is whether existing governance
systems can coordinate effective intervention to counter the
resulting tensions.
Simultaneous progress on both substance and process is
needed. Parliaments and multilateral institutions must do a better job at facilitating cooperative policy implementation, which
will require a willingness to reform outmoded institutions,
including political lobbying.
No one should underestimate the growth challenge facing
todays global economy. The stronger sectors (within countries
and across them) will continue to recover, but not enough to
pull up the global economy whole As a result, weaker sectors risk
being surpassed at an ever-faster pace. These trends will become
more difficult to reconcile and keep orderly if governance systems fail to adjust.
Mohamed A. El-Erian is CEO and co-CIO of PIMCO,
and the author of When Markets Collide.
Project Syndicate, 2013.
www.project-syndicate.org

Why Liberia now?

For those who remember Liberia as an offshore jurisdiction, there is no better time than now to metaphorically revisit the jurisdiction. Liberia is a premier corporate jurisdiction
that is still going strong after more than 65 years of providing
corporate services to the worlds financial and investment
communities. The longevity of the Registry can be attributed
to its ability to provide a variety of quality services, at a relatively economical rate, in an evolving business sector. For
those who are not familiar with Liberia as an offshore jurisdiction, I would like to introduce you to one of the oldest
providers of corporate registry services. The Liberian
Associations Law, generally modeled on the corporate law of
the U.S. State of Delaware, allows for the formation of
Corporations, Limited Liability Companies (LLCs), Private
Foundations and Limited Partnerships.
When facing the challenging decision as to which jurisdiction best satisfies your clients interests, you will immediately
recognize that Liberia meets the majority of your prerequisites.
The following are the top advantages of the Liberian
Corporate Registry:
l It has an extensive history of incorporating for asset and
wealth protection purposes. One of the most common uses
for Liberian corporations is asset holding, including the
ownership of real estate and cargo vessels around the world.
l It is not a banking and financial center.
l It is not considered a tax haven by many international

communities: Liberia was removed from Frances blacklist of

tax havens in April 2012 and is not considered a tax haven by
the United States. Liberia is not listed on the U.S. State
Departments 2012 International Narcotics Control Strategy
Report (INCSR) as a jurisdiction of prime concern for money
laundering, whereas many similar jurisdictions cannot make

By Mario Michaels
Business Development Manager,
Liberian Corporate Registry - Cyprus
a similar claim.
Liberia is white-listed by the OECD (Organisation for
Economic Cooperation and Development) and is currently
undergoing its Peer Review. Its non-resident corporate registry is administered by a US-based, privately owned corporation, LISCR, LLC with regional offices located worldwide.
It provides one exclusive registered agent, The LISCR Trust
Company, for service of process for all non-resident business
entities. Liberia does not require filings of the names of directors, officers, shareholders or minutes in the Public Register.
However, Corporations may voluntarily file corporate information if it is required to be publicly available, or they may

privately record corporate information with the Registered

Agent, and such information will not be available to the public.
Liberia offers same-day incorporations as a standard option
and adopted the Electronic Transactions Law in 2002,
enabling entities to conduct international business using
electronic communications and transactions. This development paved the way for Liberias use of an electronic Register,
a secure, web-accessible data network, which facilitates the
prompt and efficient formation of entities and the filing and
issuance of documents from its worldwide network of offices
24 hours a day, 7 days a week.
Also, Liberias registered corporate clients have access to
eCorp, a web-based application providing online access to
the Registry to form new corporations and manage existing
corporations, obtain Certificates of Incorporation and
Certificates of Goodstanding, reserve names for new corporations, generate and review statements of account and pay
fees.
Finally, Liberia is a respected and professional provider of
corporate and ship registration services. Since major international financial institutions routinely loan billions of dollars to
Liberian corporations under ship finance arrangements,
Liberian corporations are recognized by banking facilities and
investors worldwide. For more information on the Registrys
Corporate services, contact Mario.Michaels@liscr.com,
www.LiberianCorporations.com or Tel: +357 97877009.

EBOMAIAIA OIKONOMIKH EHMEPIA

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April 10 - 16, 2013

20 | WORLD MARKETS | financialmirror.com

North Korea: anticipating war or just rhetoric?

By Oren Laurent
President, Banc De Binary

In recent weeks, weve seen political tensions intensify in Asia. It is highly probable
that North Korea is employing more rhetoric
than it would ever act on, but were talking
about dictators, egos, and nuclear weapons:
nothing can ever be certain. Even the slightest possibility that North Korea is genuinely
anticipating war has been enough to cause
concerns to echo around the world and the
financial markets.
After US army exercises with South Korea
and the US imposing of sanctions following
North Koreas detonation of a nuclear device
in February, Kim Jong-Uns regime has
intensified its statements, threatening confrontation and even nuclear war. Last week it
asked countries to consider evacuating their
embassies, which it warned cannot be protected should a conflict arise. According to
its foreign ministry, The current question
[is] not whether, but when a war would
break out.
Should this be interpreted as a real threat?
Or just political wordplay? The South Korean
media reported on Friday that North Korea

has placed two intermediate-range missiles

on mobile launchers hidden on the east
coast. If true, this could pose a direct threat
to Japan or US Pacific bases. However, the
likelihood that they would use in the near
future them seems slim.
Most probably, North Korea does not want
global criticism and interference, and is acting in the hope that the US will back away.
Indeed, the British Foreign Office referred to
the warning about the safety of embassies in
Pyongyang as simply another step in their
continuing rhetoric that the US poses a
threat to them.
However China, North Koreas largest
trading partner and closest ally, isnt looking
to take chances. It has asked for calm and has
proposed talks to mitigate the tensions.
President Xi Jinping said publicly that No
one should be allowed to throw a region and
even the whole world into chaos. while
pursuing its own interests, a country should
accommodate the legitimate interests of others. For Professor Lam at the Chinese
University in Honk Kong, Xis words were
intended as a tough warning both to North
Korea not to intensify tensions, and also to
the US and South Korea not to provoke the
Kim regime.
War may not be as imminent as North
Korea is trying to make out, but the question
arises as to how long the US, South Korea,
and the international community can

closed on Friday at its lowest point since

November. Adding to these market concerns
is the fact that North Korea has been
blockading South Korean workers and supplies from entering a join industrial park
which supplies 123 South Korean factories.
The resulting lack of materials had already
forced four factories to stop production by
the weekend.
South Korean vice finance minister
warned that In the past, North Korea-related events had little impact But recent
threats are stronger, and the impact may
therefore not disappear quickly. Economists
and politicians will be looking towards
Pyongyang for clues about its future behavior on April 15, the birthday of Kim II-sung,
North Koreas founder. The anniversary is a
time of mass nationalist celebrations and
demonstrations of military prowess. Will the
regime remain quiet? Will it use the occasion
to issue further rhetoric? Or, most provocatively will it dare another weapons test?
remain calm while enduring such tough verbal threats. It is unclear yet whether China
will be in a position to mediate successful
talks, and the resulting sentiment and uncertainty is weighing heavily on the minds of
foreign investors. Amid all the tensions, (and
also separately influenced by Japans monetary easing policies) South Koreas main
stock index started falling on Monday and

www.bbinary.com

Yen hits 4-year low vs dollar, focus on 100

The yen pushed deeper into multi-year
lows against the dollar and euro on Tuesday
as the market saw every reason to sell the
currency with the Japanese central bank on a
warpath to battle deflation.
The dollar rose to as high as 99.67 yen on
trading platform EBS, the greenbacks
strongest level versus the yen since May
2009. The dollar later pulled back on profittaking and last stood at 99.23 yen, down
0.2% on the day.
The euro hit its highest since January
2010 against the yen of 129.935 yen. The
euro last changed hands at 129.48 yen, up
0.2% from late U.S. trade on Monday.
Since the Bank of Japan (BOJ) unveiled a
massive stimulus program last Thursday, the
dollar has climbed roughly 7% against the
yen. For USD/JPY, upside momentum
remains strong and an eventual test of
100.00 seems in the cards, said Vassili

Serebriakov, strategist at BNP Paribas.

Markets are increasingly focused on the
notion that larger JGB purchases at longer
maturities by the BOJ could push Japanese
domestic long-term investors elsewhere.
In a research note, analysts at JPMorgan
noted that Japanese households hold 55% of

cash and deposits. Even the thought that

some of this cash may flow abroad is lowering yields across the globe and pushing down
the yen.
I get the sense that the dollar could rise
to about 110 yen this year, and about 105
yen in three months time, a trader for a

FOREX COMMENTARY & TECHNICAL ANALYSIS

their financial assets in deposits and cash,
compared to 14% in the United States and
36% in the euro zone. They added that
Japanese life insurers hold 140 trln yen in
Japanese government bonds (JGBs).
According to BOJ data, Japanese households held 1,547 trln yen in financial assets at
the end of 2012, including 854 trln yen in

Japanese bank told Reuters, adding that the

actions of Japanese institutional and retail
investors were a focal point. Still, the yen
found some support on Tuesday as market
players sold the dollar to lock in profits,
traders said. Separately, there were optionsrelated dollar offers at levels below 100.00

yen, said the trader for a Japanese bank in

Bangkok. While stop-loss dollar buying was
likely to emerge if the greenback rises above
100.00 yen, dollar offers were also lurking
above that threshold, he added.
One possible technical resistance for the
dollar lies at about 99.73 yen, which is the
50% retracement of the dollars drop from a
June 2007 high of 124.14 yen down to a
record low of 75.311 yen set in October 2011.
Underscoring the Japanese currencys
weakness, commodity currencies touched
multi-year highs against the yen on Tuesday,
with the Australian dollar hitting its highest
since July 2008 at about 103.80 yen and the
New Zealand dollar rising to its highest since
February 2008 at about 84.49 yen.
Elsewhere, the euro rose 0.3% to $1.3046.
The euro hit a three-week high of $1.3068
earlier after triggering some stop-loss buying
at levels near $1.3050.

Disclaimer: The commentary appearing on this page is for indication purposes only and Eurivex does not take any responsibility for investment action taken. Nothing in this report should be considered to constitute investment advice. It is not
intended, and should not be considered, as an offer, invitation, solicitation or recommendation to buy or sell any of the financial instruments described herein. Trading on leverage is very risky and may lead to losses.

April 10 - 16, 2013

financialmirror.com | MARKETS | 21

Why does velocity fall in Spring?

gle to apply appropriate seasonally adjustments. Take US payrolls as an example. Unadjusted, they collapse every winter,
and then rebound in the spring.
This is for a number of reasons, including the fact that
construction work slows during the coldest months and then
rebounds as the ground thaws in spring. Statisticians adjust
for this, and periodically adjust the scale of these adjustments
as the nature of the economy changes. But adjusting the
adjustments is not an easy task, considering construction
payrolls collapsed 30% from 2007 to 2011 and then started to
recover (construction payrolls are now only 25% below
2007 levels). During a period of major economic change such
as in the aftermath of the greatest recession in a generation,
it is possible that seasonal adjustments are off. Consider
that unadjusted, private payroll growth actually accelerated
in March (as it usually does) to +684,000 jobs, from
+544,000 in February and 2.3mn in January. It is only after
the major seasonal adjustments that we get the headline
deceleration to 95,000, from 254,000, which understandably

Marcuards Market update

by GaveKal Research
Tolstoy said that spring is the time of plans and projects.
Obviously, Tolstoy did not manage money, as for the fourth
year in a row, spring appears to be the time when US growth
indicators roll over, the euro project threatens suicide, and
investor risk appetite falls out of fashion. To be honest, we
are still scratching our heads for a solid explanation (and very
much welcome comments from our wise readers). But here
are a few possibilities to kick off the discussion:
Are seasonal adjustments for US growth data misleading? This is a question a number of strategists, including our
friend Peter Kim at Daewoo Securities, have recently been
considering. It is no doubt speculative, however given the
rapid change of the US economy in the last four years, it is
conceivable that even the very best statisticians would strug-

has everyone worried.

Is there a seasonal reason for the euro crisis to flare up
in spring? Perhaps it has something to do with the political
calendar? Perhaps companies try to squeeze production out
in the spring before much of the European labor force starts
working fewer hours in the summer, leading to an increase
in the demand for capitala demand for cash that lays bare
any existing weakness in the monetary union? Or perhaps it
is simply due to the weather? Europes revolts and revolutions have tended to occur in the spring or early summer for
the simple reason that throwing stones at the police in the
street is a lot less fun when it is freezing outside.
Perhaps it is just coincidence. It could just be that every
spring has happened to bring some shockwhether it be a
breakdown in European policymaking, a debt ceiling debacle
in the US, a Japanese earthquake, an Arab Spring, a massive
yen devaluation. But whatever the reason, investors might be
forgiven for feeling that the flight of the sparrows does not
bring glad tidings.

Australia is lucky, but China might be luckier

Australia apparently suffers from a twospeed economy, where a booming resource
sector drives up both borrowing costs and the
value of the currency, thus crowding-out
other activities. But any day of reckoning
resulting from such an unbalanced economy
has been deferred in large part due to the
blow-back effects of the post-2008 global
financial crisis. It could just be argued that the
crisis which hurt so many other big
economies was, in fact, the
lucky break that this lucky country needed.
Let us explain. Over the next
year, Australias current account
deficit to GDP ratio is projected,
by the IMF, to hit-6% of GDP.
Such a stunning gap between
earnings and spending would, in
most economies, force higher
borrowing costs. But these days,
Australia is funding a major
mining-related capex boom at
ultra-cheap borrowing costs.
And for this, it can thank the
financial calamity of 2008. In the
wake of the GFC, as it is
known Down Under, one is
hard-pressed to find an OECD country with
strong banks and low public debt levels. The
return on equity earned by Australian banks is
one of the highest in the world, and Australia
is among what the IMF calls a diminishing
pool of countries with a sovereign AAA rating
from the three major credit agencies. The
result is strong portfolio flows into its fixedincome and bank deposit markets. Such flows

have been instrumental in financing the current account deficit over the past year, making up for weakened commodity export earnings (though theyve been perking up of late).
The hope is that these record-low funding
costs will also revive animal spirits elsewhere
in the economy. Australia is one of the bestperforming equity markets year to date, up
more than 8% in USD terms and this despite
continued weakness in its heavy-weight listed

resources firms. The leadership is coming

from industrials, consumer stocks and banks;
in the last four or five months stocks in these
sectors have zoomed up some 25-40% on
average. Every day, it seems, we see broker
reports tilting towards, or reinforcing, a riskon bias in Australian equities. Many expect a
broader economic revival later this year.
Unfortunately, there is a key risk to this

www.marcuardheritage.com

APR 10
APR 10
APR 10
APR 11
APR 11
APR 11
APR 11
APR 12
APR 12
APR 12
APR 12
APR 12
APR 12
APR 12
APR 12
APR 12
APR 13

Country
CNY
US
US
AUD
EUR
US
US
EUR
EUR
US
US
US
US
US
US
US
EUR

Detail
Trade Balance
FOMC Meeting Minutes due 9.00pm
Federal Budget Balance
Australia Unemployment Rate and Change due 4.30am
Italian 10-year Bond Auction
Weekly Unemployment Claims due 3.30pm
30-year bond auction
Industrial Production M/M due 12.00noon
Eurogroup Meetings - ALL DAY
Retail Sales M/M due 3.30pm
Core Retail Sales M/M ex autos due 3.30pm
PPI M/M due 3.30pm
Core PPI M/M
Prelim UoM Consumer Sentiment due 4.55pm
Business Inventories M/M due 5.00pm
Fed Chairman Ben Bernanke speaks starting 7.30pm
ECOFIN Meetings - ALL DAY

Indicated times are Cyprus time

Forecast

WORLD CURRENCIES PER US DOLLAR

CURRENCY

Previous

15.2B

15.3B

5.40%

-$203.5B
5.40%

362k

385k

0.30%

-0.40%

0.00%
0.20%
-0.10%
0.20%
78.8
0.40%

1.10%
1.00%
0.70%
0.20%
78.6
1.00%

Source: Eurivex

CODE

RATE

EUROPEAN
Belarussian Ruble
British Pound *
Bulgarian Lev
Czech Koruna
Danish Krone
Estonian Kroon
Euro *
Georgian Lari
Hungarian Forint
Latvian Lats
Lithuanian Litas
Maltese Pound *
Moldavan Leu
Norwegian Krone
Polish Zloty
Romanian Leu
Russian Rouble
Swedish Krona
Swiss Franc
Ukrainian Hryvnia

BYR
GBP
BGN
CZK
DKK
EEK
EUR
GEL
HUF
LVL
LTL
MTL
MDL
NOK
PLN
RON
RUB
SEK
CHF
UAH

8600
1.5252
1.5026
19.795
5.7282
12.0216
1.3013
1.646
228.66
0.5382
2.6529
0.3299
12.3331
5.7375
3.1701
3.3864
31.2551
6.4165
0.9362
8.142

AUD
CAD
HKD
INR
JPY
KRW
NZD
SGD

1.042
1.017
7.7635
54.51
98.82
1139.05
1.1786
1.2403

BHD
EGP
IRR
ILS
JOD
KWD
LBP
OMR
QAR
SAR
ZAR
AED

0.3770
6.8476
12073.90
3.6222
0.7055
0.2852
1501.00
0.3850
3.6404
3.7501
8.9957
3.6728

AZN
KZT
TRY

0.7835
150.93
1.7880

AMERICAS & PACIFIC

Australian Dollar *
Canadian Dollar
Hong Kong Dollar
Indian Rupee
Japanese Yen
Korean Won
New Zeland Dollar *
Singapore Dollar
MIDDLE EAST & AFRICA
Bahrain Dinar
Egyptian Pound
Iranian Rial
Israeli Shekel
Jordanian Dinar
Kuwait Dinar
Lebanese Pound
Omani Rial
Qatar Rial
Saudi Arabian Riyal
South African Rand
U.A.E. Dirham

Disclaimer: This information may not be construed as advice and in particular not as investment, legal or
tax advice. Depending on your particular circumstances you must obtain advice from your respective professional advisors. Investment involves risk. The value of investments may go down as well as up. Past performance is no guarantee for future performance. Investments in foreign currencies are subject to exchange
rate fluctuations. Marcuard Cyprus Ltd is regulated by the Cyprus Securities and Exchange Commission
(CySec) under License no. 131/11.

Weekly Economic Calendar

Date

crisis boom. Australia may be lucky (to get a

resource roll-out financed on the cheap), but
in the long run, China will probably be even
luckier.

scenariothe Australian dollar. While funding costs have fallen, Australias terms of trade
have not materially shifted. A strong currency
subsidizes consumption and taxes production. One has to ask just much non-mining
capital spending can be inspired, with the
strong AUD weighing on export competitiveness, while also making imports so temptingly cheap? The Reserve Bank of Australia, in
announcing yesterdays hold on record-low
3% policy rates, seemed to complain that the currency was
stronger than what would be
expectedand left the door
open for further rate cuts.
So to answer the question
no, Australia has not completely escaped from its two-speed
fate. The GFC has insured cheap
financing for Australias economy, but these financial inflows
are keeping the currency
strong. There seems no rescue
in sight for its diminished manufacturing sector; and with its
very high household debt levels,
there is a natural cap on a
household consumption boom.
All dressed up with cheap money, but
nowhere to go
In fact, if there were one unambiguous
beneficiary of Australias current mining
capex boom, we would have to look north to
China. Australias long-term resource capacity boom should lower the scope for the type of
supply squeeze that sent construction-related
commodities into the stratosphere in the pre-

ASIA
Azerbaijanian Manat
Kazakhstan Tenge
Turkish Lira
Note:

* USD per National Currency

The Financial Markets

Interest Rates
Base Rates

LIBOR rates

CCY
USD
GBP
EUR
JPY
CHF

0-0,25%
0.50%
0.75%
0-0,1%
0-0,25%

Swap Rates

CCY/Period

1mth

2mth

3mth

6mth

1yr

CCY/Period

2yr

3yr

4yr

5yr

7yr

10yr

USD
GBP
EUR
JPY
CHF

0.20
0.50
0.06
0.12
0.00

0.24
0.50
0.10
0.14
0.01

0.28
0.51
0.13
0.16
0.02

0.44
0.60
0.22
0.25
0.09

0.72
0.91
0.42
0.45
0.25

USD
GBP
EUR
JPY
CHF

0.38
0.58
0.44
0.23
0.09

0.49
0.63
0.54
0.25
0.17

0.66
0.73
0.68
0.29
0.28

0.89
0.92
0.84
0.34
0.43

1.37
1.28
1.17
0.47
0.74

1.92
1.84
1.58
0.69
1.09

Exchange Rates
Major Cross Rates
CCY1\CCY2
USD
EUR
GBP
CHF

Opening Rates

100
1 USD 1 EUR 1 GBP 1 CHF
JPY
1.3013
0.7685
0.6557

0.8532

0.9362

1.2183

1.5252

1.0681

1.0119

1.1721

0.8208

0.7776

0.7003

0.6635

1.4279

0.9474

Weekly movement of USD

CCY\Date

26.02

05.03

12.03

28.03

09.04

CCY

Today

USD
GBP
JPY
CHF

1.3007

1.2990

1.2977

1.2740

1.2996

0.8553

0.8589

0.8714

0.8416

0.8509

119.49

120.54

124.96

119.68

128.71

1.2063

1.2188

1.2287

1.2116

1.2106

GBP
EUR
JPY
CHF

1.5252
1.3013
98.82
0.9362

Last Week %Change

1.5227
1.2833
92.93
0.9462

-0.16
-1.40
+6.34
-1.06

April 10 - 16, 2013

24 | WORLD MARKETS | financialmirror.com

Qatar seeks returns in deals, not politics

l

Prefers exclusive talks with sellers, not auctions

Bankers and politicians touting their countries wares have to work hard to get the attention of Qatars sovereign wealth fund, such is
the range of its interests, from banks to cars to
soccer clubs, and its exacting requirement for
returns.
With estimated assets of about $200 bln,
and more than a dozen potential deals on its
radar every week, the state-run firm has no
time for less than compelling investment
opportunities and hopes to make more than
17% on its book this year, according to one
banker close to the fund.
In a series of interviews with top bankers
and officials who deal with the fund, most of
whom wished to remain anonymous due to
their business relationships, Reuters probed
the thinking behind the gas-rich Gulf states
investments and the future destination of its
capital.
Theres clearly an open-door policy. Qatar
has no mystery and no global mission to conquer the world. All it is is buying strategic
shares in big companies at an advantage,
says a senior banker at a global bank who has
worked on several deals for the fund.
Qatar Holding, the investment arm of the
wealth fund, has been actively deploying the
nations riches from plentiful natural gas in
recent years in a string of high-profile assets
ranging from French soccer club Paris SaintGermain to stakes in German sports-car
maker Porsche, British bank Barclays and
Swiss lender Credit Suisse.
The worlds top exporter of liquefied natural gas has a lot of spare cash to invest; recent
figures showed a budget surplus of $26 bln in
the second quarter of fiscal year 2012/13, or
54% of GDP for the period.
The state exports 6 mln barrels a day of oil
equivalent (1mln oil and 5mln gas). At $100 a
barrel, that would give revenues of $200 bln a
year, the banker close to the fund said.
After spending on government and budgets, the remaining $50 bln are channelled to
QIA for investments. Qatar Investment
Authority invests $40-$50 bln a year.
Executives at Qatar Holding, who said last
year it had about $30 bln to spend, have said
the fund follows no particular investment
strategy and nothing is off limits.
You name it - shares, bonds, real estate,
private equity. We will look at every sector in
every country around the world, Hussain al-

Abdullah, Qatar Holdings vice-chairman, told

a news conference in February.
The Qataris have shown to be astute
investors. Their focus is to identify good
assets which they can acquire opportunistically regardless of geography or asset class, said
Christos Papadopoulos, chief executive for the
Middle East, North Africa and Pakistan, at
Standard Chartered.
Its all about the price.

INFRASTRUCTURE, REAL ESTATE

A growing focus for the fund is infrastructure investment.

Another banking source said the fund had
hired Deven Karnik, the most senior managing director of Morgan Stanleys Asia infrastructure fund until he left in March, to head
a new infrastructure division.
Bankers say the fund, which paid 900 mln
pounds ($1.4 bln) last year for 20% of BAA,
which owns Londons Heathrow airport,
Europes busiest, is in talks with the UK government to invest billions more in British
infrastructure.
The fund is now looking actively at
assets in pipelines, ports, airports, roads.
Everything infrastructure will grab their
attention now, the source said.
QIA is also bullish on real estate, having
invested billions of dollars in high-end property in Europe, especially London, where it
owns assets such as the Shard skyscraper.
It is looking at mezzanine-related deals
with distressed sellers where the fund has a
likelihood of taking possession of the property, said a London-based banker who advises
the fund.

BILATERAL DEALS

Qatar prefers bilateral transactions where

exclusive talks with sellers allow them to
negotiate better terms and it generally avoids
auctions or formal processes with multiple
bidders.
The fund also demands additional perks
like downside protection contracts, which
ensures their investments are safeguarded in
the event of a sharp downturn in asset prices,
bankers aware of the funds plans said.
In recent months, the fund has embarked
on an investment strategy of picking minority stakes in large global companies such as
oil giant Royal Dutch Shell, jewellery maker

Tiffany & Co and Germanys Siemens.

The strategy took an activist turn in 2012
when it demanded better terms from
Glencore for its planned acquisition of
London miner Xstrata, in which it had built
up a stake of more than 12%, forcing the
commodities giant to raise the share swap
offer.
Among advisors, Credit Suisse, in which
it holds the second-largest ownership stake
of 6.2%, is a preferred choice.
The fund has also increasingly used boutique advisory firms such as Lazard,
Evercore Partners and Perella Weinberg in
the recent years on big deals.
Bankers say the funds choice of boutique
advisors rather than bulge-bracket investment banks shows its focus is advice, rather
than financing requirements.

RETURNS

Advisers and bankers working closely with

the fund say deal selection is all about the
internal rate of return (IRR).
Its 100 percent about economics and
zero politics. Many deals have been killed if
they dont make financial sense, even if they
are politically beneficial. It all boils down to
the IRR, a banking source close to the fund
said.
In a rare media briefing in February, AlAbdulla said the average return in the past
four years was around 13%.
QIA does not disclose its targets, but a
banker close to the fund said return on investments was 17% in 2012. They dont benchmark against any index but theyre hoping to
achieve more this year, he said.
By comparison, the Abu Dhabi Investment
Authority (ADIA), one of the worlds biggest
sovereign wealth funds, said in its 2011 annual review that it made returns of 6.9 percent
on an annualised basis over a 20-year period
as of December 31, 2011.

CONCERNS

An improvement in market liquidity and

sentiment has meant large private equity
firms (PE) and pension funds are posing
more competition for the kind of assets
Qatar is interested in.
We have seen them walk away from couple of situations recently because the sellers
brought in PE firms. When market condi-

tions improve, the strategy of bilateral talks

and negotiating better terms always dont
work as there is always another buyer, a
Dubai-based banking source said.
Another potential concern is the concentration of power and decision making with a
handful of people and the absence of a large
pool of second and third level managers at
the fund who have the authority to make key
decisions.
All deals are approved by the board, which
includes central bank governor Sheikh
Abdulla bin Saoud Al-Thani, finance minister
Yousef Kamal and is chaired by Prime
Minister Sheikh Hamad bin Jassim Al-Thani.
Ahmad Al-Sayed, managing director and
chief executive officer of Qatar Holding, is
another key decision maker.
If the deal hits the $5 bln mark or more
then it goes to the Emir and crown prince for
blessings, one source said.
Despite the concerns, the funds appetite
for deals is only seen increasing in the coming years as it builds out a portfolio spanning
several sectors and regions.
Qatar has been very active and will continue to be active going forward. They are
very smart and sophisticated investors and
are very focused on what they do, said Elif
Bilgi, country head for Turkey and co-head
of emerging markets investment banking at
Bank of America Merrill Lynch.

Republican sees Obama budget offer OK

South Carolina Senator Lindsey Graham on Sunday became
the first prominent Republican to publicly praise, however
lukewarmly, the budget proposal the White House outlined last
week.
Graham said that while he believes President Barack
Obamas plan is overall bad for the economy, there are nuggets
of his budget that I think are optimistic, and that could set the
stage for a broad bargain to put the nations finances on a
stronger footing. He was speaking on NBCs Meet the Press
program.
Graham, a conservative who has deviated from party
positions in the past, and has said he would consider raising up
to $600 bln in new tax revenue if Democrats accept significant
changes to Medicare, the government health program for elderly
Americans, and Medicaid, the health safety net for low-income
people.
The White House on Friday said the president would propose
a budget that would offer cuts to so-called entitlement programs
such as Social Security, a retirement program, and Medicare in
exchange for increased tax revenues and a commitment to
spend money on education and infrastructure repair.
Obamas proposal, which will formally be made public on

Wednesday, is a symbolic document, and both the Senate and

House of Representatives have already passed their own budget
resolutions.
The presidents aides have said he hopes to use the offer to
appeal to enough middle-of-the-road lawmakers of both parties
to pass a broad deal to reduce the budget deficit.
Obama also hopes to reverse the deep spending cuts that
automatically kicked in March 1 as a result of the failure of the
White House and Congress to reach an agreement on replacing
them.
Grahams reception of the presidents budget proposal is
warmer than his fellow Republicans and some of the presidents
own allies have accorded it so far.
House Speaker John Boehner said last week the president
was ignoring Republicans staunch opposition to any tax hikes.
And independent Senator Bernie Sanders, who votes with the
Democrats, said he would oppose any efforts to lower payments
to Social Security beneficiaries.
In an illustration of the difficulty the president will have
retaining support among his fellow party members, a House
Democrat said the presidents plan risks splintering the partys
loyalties. We need to be solid. We need to indicate to the

administration this is a non-starter in the House,

Representative Raul Grijalva of Arizona said on MSNBC.
Graham said that the presidents offer contained approaches
to cutting spending that he supports. One is the proposal to
index cost-of-living increases for government program benefits
to a less-generous measure of inflation.
The president is showing a little bit of leg here, this is
somewhat encouraging, Graham said. His overall budgets not
going to make it, but he has sort of made a step forward in the
entitlement-reform process that would allow a guy like me to
begin to talk about flattening the tax code and generating more
revenue.
Obama has invited 12 Republican senators for dinner on the
day of the budget release as part of an effort to soften resistance
among the opposition political party.
The presidents focus, in addition to the regular order
process that members of Congress say they want, is to try to find
a caucus of common sense, folks who are willing to
compromise, that dont think compromise is a dirty word, and
try to get something done, White House senior advisor Dan
Pfeiffer said on ABC News This Week with George
Stephanopoulos program.

April 10 - 16, 2013

financialmirror.com | GREECE | 25

NBG, Eurobank face state rescue

l Unlikely to raise enough cash from market; Merger blocked by international lenders
Two of Greeces biggest banks risk being nationalised after
admitting they were unlikely to raise enough cash from private
investors and seeing their merger blocked by the countrys
international lenders.
National Bank bought 84.3% of smaller rival Eurobank via a
share swap in February, as Greek banks consolidated to survive
a debt crisis that has pushed the countrys economy into a sixyear slump.
But lenders fear the combined entity, with assets of about
170 bln euros, will be too big relative to Greeces 190 bln euro
economy and make it difficult to sell in the future, prompting
the state to halt their integration until a state bank support fund
decides their future.
Both banks told the central bank they are unlikely to raise a
set portion of their planned share issues from the market,
meaning they would fall under the control of the support fund,
the Hellenic Financial Stability Fund (HFSF).
Shares of both banks initially fell as much as 30% on
Monday on concerns their investors would effectively be wiped
out if the HFSF takes full control of the lenders.
But Eurobank shares reversed course to gain 25% in late
trade on talk the bank would make a final push to meet the
required private sector participation on its own and stay privately run.
We will mobilise and try to cover the required 10% from the

market. I am not saying we will make it, but we will try, a

Eurobank executive said, putting the banks needs from the private sector at 580 mln euros.
Together, both banks need 15.6 bln euros to boost their solvency ratios to levels set by the central bank after losses from a
sovereign debt writedown.
Government officials have said deposits in the banks will be
unaffected by the deals suspension, in a bid to reassure jittery
Greeks after a bailout to rescue Cyprus included slapping a levy
on deposits.
Finance Minister Yannis Stournaras said the troika of international lenders has not vetoed the deal, adding that the 50 bln
euros set aside from the bailout package for the recapitalisation
would be sufficient.
No one has vetoed the National Bank-Eurobank integration. Whether it will take place or not depends on the terms the
HFSF will set, Stournaras told MPs on Monday.

RECAPITALISATION FEARS

Under a recapitalisation plan agreed with Greeces international lenders, the HFSF will supply most of the capital the
banks need in exchange for new shares and contingent convertible bonds.
But to stay private, banks must ensure private investors buy
at least 10% of their share offerings. Analysts have warned that

Greeces banks will not be able to bounce back immediately

despite an injection of billions of euros.
It will take time for banks to get on a more sustainable footing as the economy continues to shrink. Its too early to expect
that credit flows will lift the economy, said Giada Giani, an
economist at Citigroup.
If NBG and Eurobank are nationalised, it would result in
about 40% of the banking sector being controlled by the state,
while the other two major Greek lenders remain privately run.
National Banks 84.3% stake in Eurobank could be diluted
down to a low single-digit holding if the HFSF pumps in all the
capital it needs.
Rival lenders Alpha and Piraeus Bank have already
announced share offerings, aiming to meet the required 10%
private-sector take up.
Whether NBG and Eurobank will be eventually integrated or
run as stand-alone entities will be decided by the HFSF fund
after their recapitalisation is completed. If the plan is dropped,
Piraeus will emerge as the countrys biggest bank.
The key issue for Greece is to have a well capitalised banking system, willing to lend and get the economy out of freefall, said economist Ben May at Capital Economics in London.
From a macro-economic perspective, it doesnt make that
much difference if this means having 10, seven or five banks,
May said.

After 45 years, deflation

Greek consumer prices entered deflationary territory for
the first time in 45 years as the countrys deep recession
pushes down prices.
Consumer prices fell 0.2% year-on-year in March, the
first month of deflation since 1968, the statistics service
said, with EU-harmonised inflation also falling to -0.2%.
Greeces economy is in its sixth year of recession, hurt
by austerity policies imposed under a bailout from the EU
and IMF which is keeping the country afloat.
The deflation process is expected to continue for the

remainder of this year, providing some support to overly

depressed disposable incomes, said Platon
Monokroussos, an economist at Eurobank.
Overall this is in line with the existing bailout
programme and likely to somewhat alleviate troika worries
that prevailing rigidities in the domestic economy hinder
an adjustment in domestic prices.
Data also showed industrial output fell 3.9% year-onyear in February after dropping 4.2% in the previous
month, underscoring the grim state of the Greek economy.

OPAP gets OK for IT deal

Betting monopoly OPAP said it has won shareholder
approval for a disputed IT services contract with Intralot, a
move that could complicate the sale of the countrys stake in
the gambling firm.
Greeces privatisation agency, HRADF, is selling all but 1% of
the governments 34% stake in OPAP as part of efforts to raise
2.6 bln euros in privatisation proceeds this year.
The OPAP sale, along with the privatisation of natural gas distributor DEPA, is
among the biggest sales Greece is expected to conclude as part of an EU/IMF
bailout.
But two of the seven potential suitors
for the OPAP sale - a bid vehicle called
Emma Delta backed by shipping tycoon
George Melisanidis and Czech investor
Jiri Smejc, and a consortium led by gaming equipment company Gauselmann and gaming software group Playtech - have
threatened legal action if the contract for a new central hardware and software system was approved.
They say that the contract would involve OPAP paying more
than it had stated and that the buyer of the governments stake
would be bound to it for five years without any say. Both wouldbe buyers have called on OPAP and HRADF not to formalise the
contract.
But OPAP shareholders who attended the meeting on
Saturday voted in favour of the Intralot deal. Investors representing 37.9% of OPAPs outstanding shares voted, with 71% of
them approving the contract while less than 1% voted against
it.
HRADF did not take a position on the contract and cast a
blank ballot at the meeting, saying that it was up to OPAPs
management to decide on the deal.
HRADF is not, in any case, in a position to evaluate the
terms of the deal, it said in a statement read out to sharehold-

ers. The approval of these terms is an issue for OPAPs management, which has the specific knowledge of the respective
technical and economic parameters.
For these reasons, HRADF is attending (the meeting) but is
not voting in favour or against.
Some small shareholders criticised HRADFs neutral stance,
while others complained about the cost of the deal.
After the contract was approved, one
potential suitor threatened to take
strong legal action against OPAP.
OPAPs chairman Constantinos
Louropoulos reiterated that the cost of
the renewed contract would be about
36% lower than the previous deal and that
this was close to what other European
peers were paying for technology.
The investment is around 1.25-1.26% of the companys
total revenues, he told shareholders. So this number is considered pretty competitive in the sense that thats what we are
seeing in several other lotteries.
Intralot, one of the worlds biggest gaming software
providers, has been OPAPs IT contractor since 2001, when
OPAP was listed on the Athens bourse.
Its latest contract expires in July and OPAP considers its
renewal, which it said would cost 109 mln euros for services
and capital expenditure plus 46 mln euros for terminals maintenance, as vital for its uninterrupted operation.
The shareholder meeting, initially scheduled for March 26,
was postponed to April 6 to give OPAPs biggest shareholder,
HRADF, more time to study the agenda.
OPAP, in which big U.S. hedge and investment funds
including Baupost Group own a stake, holds a national monopoly on sports gambling until 2020 and on lotteries until 2030.
The company, with annual sales of about 4 bln euros, also has
the exclusive licence to launch video lotto terminals in Greece.

Foreign investors
return to ATHEX
International investors recorded inflows of EUR 40.5 mln
on the Athens Stock Exchange with Hellenic Exchanges
reporting in its monthly bulletin for March that foreign institutional investors recorded inflows of EUR 9.8 mln.
Greek investors were overall net sellers by EUR 40.1 mln,
with retail investors recording outflows of EUR 1.5 mln. In
the January-March period, foreign investors were net buyers
of EUR 110.2 mln, while domestic investors net sellers of
EUR 108.8 mln.
The average daily value of transactions shaped at EUR
65.5 mln in March, compared to 59 mln in the previous
month and 50.6 mln in the same month a year ago. Foreign
investors accounted for 48.8% of total turnover, up from
34.6% in February and 37.4% in March a year ago.
Participation of foreign investors in the total market capitalisation at the end of March increased to 53.2% from 51.5%
one month earlier, explained Vassilis Roumantzis, analyst at
the Investment Bank of Greece.

Piraeus to hold EGM

Piraeus Bank announced that it will hold an EGM on April
12 to seek shareholder approval to proceed with a share capital increase of EUR 8.4 bln (7.33 bln for the old Piraeus
Bank, 570 mln for the good part of ATEbank and 524 mln for
the Greek units of Bank of Cyprus, Laiki and Hellenic Bank.
In the case of a lack of quorum, repeat EGMs are expected on April 17 and April 22. The amounts relating to the
recent acquisitions (ATEbank and Cypriot banks) do not
need any private shareholder participation as these will be
fully covered by the HFSF.

April 10 - 16, 2013

26 | CSE PRICES | financialmirror.com

CSE
CODE
OASIS
Index performance
CSE General Index
FTSE/CySE 20
FTSE/XA & XAK Banking
MAIN MARKET
MAIN MARKET INDEX
BANK OF CYPRUS
CYPRUS POPULAR BANK
HELLENIC BANK
LOGICOM
A. TSOKKOS HOTELS
LOUIS LTD
SECTOR TOTAL / OIKO
PARALLEL MARKET
PARALLEL MARKET INDEX
WOOLWORTH (CYPRUS) PROP
VASSILIKO CEMENT
A&P (ANDREOU&PARASKEV.)
ERMES DEPARTMENT STORES
LAIKI CAPITAL PUBLIC CO
K. ATHIENITIS CONTR. - DEV.
G.A.P VASSILOPOULOS
MITSIDES
PHIL. ANDREOU
LORDOS HOTELS HOLDINGS
LIBERTY LIFE INSURANCE
LORDOS UNITED PLASTIC
SECTOR TOTAL / OIKO
ALTERNATIVE MARKET
ALTERNATIVE INDEX
A. PANAYIDES CONTRACTING
ALKIS HADJ. (FROU-FROU)
A.L. PROCHOICE FIN. SERV.
AMATHUS PUBLIC LTD
ATLANTIC INSURANCE
BLUE ISLAND FISH FARMING
CCC TOURIST ENT.
CHRIS JOANNOU LTD
CLARIDGE INVESTMENTS
CLR INVESTMENT FUND
CPI ENTER. DEVELOPMENT
C.T.O. PUBLIC CO
CYPRINT LTD.
CYPRUS CEMENT
CYPRUS FOREST IND.
CYPRUS TRADING CORP.
CYVENTURE CAPITAL
DIMCO PLC
DISPLAY ART LTD
ELLINAS FINANCE
ELMA HOLDINGS
EXELIXIS INVESTMENT
FILOKTIMATIKI
K & G COMPLEX
KARAOLIS GROUP
KARKOTIS MANUFACTURING
KEO LTD
KOSMOS INSURANCE
KRONOS PRESS DIST.
JUPITER PORTFOLIO INV.
LEPTOS CALYPSO HOTELS
MALLOUPAS & PAPACOSTAS
MINERVA INSURANCE
MODESTOU SOUND & VISION
PANDORA INVESTMENTS
PETROLINA HOLDINGS
PIERIDES HOLDINGS
PRIMETEL PLC
PROODOS AGROS
RENOS HADJIOANNOU FARMS
ROYAL HIGHGATE LTD
SALAMIS TOURS
SFS GROUP PUBLIC CO.
STADEMOS HOTELS
TOP KINISIS TRAVEL
TOXOTIS INVESTMENTS
UNIFAST FIN. & INV.
VISION INTL PEOPLE GROUP
SECTOR TOTAL / OIKO

K.

Number Nominal

Market

Book Value Price to

Shares
('000)
A

Cap.
('000)
K.
EUR

Per Share
euro

Value
euro
A
EUR

Profit/(Loss)

Book Value
2011
Times
EUR ('000)
T
. .
.

2011
BOCY
CPB
HB
LOG
TSH
LUI

1 795 141
4 065 482
619 689
74 080
246 214
460 547

1.00
0.10
0.43
0.35
0.35
0.17

102 868
17 038
10 587
6 908
137 402

1.24
0.25
0.78
0.81
0.54
0.27
0.65

0.21
0.29
0.08
0.05
0.11

FWW
VCW
APE
ERME
LI
ACD
GAP
MIT
PHIL
LHH
LIB
LPL

114 252
71 936
182 725
175 000
282 213
13 416
38 750
8 200
45 000
35 000
122 804
48 006

0.34
0.43
0.17
0.34
0.27
0.35
0.17
1.03
0.17
0.35
0.10
0.35

114 320
31 724
29 236
17 325
16 368
8 989
5 038
4 100
4 275
3 850
3 930
2 688
241 842

1.76
3.04
0.28
0.48
0.26
4.69
0.30
3.16
0.09
1.91
0.05
0.53
1.38

0.13
0.15
0.57
0.21
0.22
0.14
0.43
0.16
1.06
0.06
0.68
0.11
0.33

3 657
14 631
1 587
5 408
25 030
2 239
5 101
242
4 435
864
7 289
7 305
1 249
20 642
4 130
29 465
2 096
5 103
743
6 160
3 135
4 692
2 306
10 800
335
948
11 772
1 547
11 934
4 559
5 694
7 735
1 019
164
31 833
61 250
1 658
15 298
5 421
298
1 650
2 557
2 727
6 825
3 175
207
196
75 000
422 108

0.88
0.49
0.02
0.49
0.73
0.80
0.49
0.42
0.39
0.07
0.65
0.09
0.27
2.20
6.13
1.86
0.47
0.28
0.29
0.67
0.04
0.32
2.73
0.97
-0.05
0.09
3.55
0.41
0.68
0.36
0.80
0.64
0.10
0.02
0.20
1.31
0.40
0.01
3.35
0.04
0.12
0.48
1.59
2.36
0.41
0.04
0.11
0.20
0.81

0.11
0.30
0.56
0.10
0.87
0.18
0.07
0.06
0.10
0.04
0.46
0.38
0.90
0.07
0.22
0.17
0.30
0.22
0.19
0.57
0.23
0.43
0.18
0.11
-0.32
1.27
0.11
0.21
0.86
0.20
0.07
0.28
0.13
0.47
0.38
0.53
0.19
3.25
0.45
0.03
0.43
0.15
0.03
0.09
0.64
0.25
0.18
5.08
0.45

APC
FBI
PROP
ANC
ATL
BLUE
CCCT
CJ
CLA
CLL
CPIH
CTO
CYP
CCC
CFI
CTC
EXE
DES
DISP
ELF
ELMA
EXIN
PES
KG
KARA
KARK
KEO
COS
KRO
ARI
LCH
MPT
MINE
MSV
PND
PHL
PGE
PTL
AGRO
FRH
ROY
SAL
SFS
SHL
TOP
COV
UFI
VIP

36 572
98 861
158 660
110 358
39 109
15 438
141 692
10 070
108 163
288 141
24 379
208 700
5 140
137 611
3 059
92 079
14 973
80 999
13 506
16 000
348 333
34 000
4 805
100 000
22 343
7 967
30 978
17 985
20 400
62 446
101 683
43 211
78 415
14 900
424 435
87 500
22 100
382 440
3 590
297 915
33 000
36 529
66 520
32 500
12 212
20 700
9 788
75 000

0.35
0.26
0.09
0.35
0.35
0.17
0.43
0.35
0.35
0.08
0.17
0.87
0.43
0.43
1.73
0.85
0.43
0.09
0.35
0.62
0.09
0.29
0.87
0.17
0.34
0.35
0.43
0.31
0.43
0.20
0.35
0.35
0.17
0.14
0.17
0.35
0.34
0.17
1.73
0.03
0.17
0.43
1.00
0.69
0.34
0.03
0.05
$ 0.10

9M
2011
EUR ('000)
K
2011

9M
2012
EUR ('000)
K
2012

Profit/(Loss)

2012
EUR ('000)

.

9M '11
-792 593
-291 493
-73 081
3 024
-1 527
-4 830
-1 160 500

9M '12
-210 956
-1 671 495
219
3 026
109
-8 489
-1 887 586

2011

9M '11

9M '12

2012

6 700
-2 312
4 059
197
-1 734
3 250
-1 647
-1 046
-1 608
702
-3 657
-1 273
1 631

3 780
-2 992

2 372
-258

287
67

-505
-3 539

1 142

-1 930

6 124
-360
-575
1 324
-34 500
3 181
-50
-1 753
-1 071
1 012
-5 616
-3 338
-35 622

2011

9M '11

9M '12

2012

1 756

1 756

482

482

Earnings
Per

Dividend
Per

Dividend
Yield

Share
2011/12
Cents

Results

Share
2012
Cents

2012

-1 371 000
-3 650 380
-100 658
3 585
-6 894
-82 674
-5 208 021

399
1 932
-2 776
-2 123
2 311
571
-3 532
-375
-3 942
-7 733
-104
-2 998
-652
-4 639
-4 127
6 152
658
1 601
-529
-257
-6 807
-15 527
1 608
5 126
-2 268
-112
-3 948
-800
108
-1 263
-10 490
1 324
-3 328
-337
-20 039
10 783
-868
-6 356
73
151
480
973
-19 200
1 577
-891
13
-56
2 739
-87 498

P/E ratio
2012

0
0
-23 440
3 173
-8 443
-30 442
-59 152

-350
1 842
-637
-1 250
2 048
432
-7 040
-376
-5 558
-7 194
-52
-1 245
-366
-9 557
-2 867
5 048
-226
676
-660
-1 404
-8 999
-5 627
673
-3 289
-2 698
-203
-7 470
-527
-2 852
-2 408
-6 041
-1 006
-1 218
-308
-9 844
5 541
-719
-5 473
-148
-1 463
-1 593
-3 279
-19 800
2 218
-482
-192
-24
1 151
-104 816

n/a
n/a
n/a
5.37
n/a
n/a
0.67

4.22
n/a
n/a
13.09
n/a
2.83
n/a
n/a
n/a
3.80
n/a
n/a
4.61

Cents
-76.37
-89.79
-3.78
4.28
-3.43
-6.61

Cents

2.50

10.87

Cents
5.36
-0.50
-0.31
0.76
-12.22
23.71
-0.13
-21.38
-2.38
2.89
-4.57
-6.95

Cents
2.31
1.50

%
10.22
3.40

2.10

21.21

Cents
-0.96
1.86
-0.40
-1.13
5.24
2.80
-4.97
-3.73
-5.14
-2.50
-0.21
-0.60
-7.12
-6.94
-93.72
5.48
-1.51
0.83
-4.89
-8.78
-2.58
-16.55
14.01
-3.29
-12.08
-2.55
-24.11
-2.93
-13.98
-3.86
-5.94
-2.33
-1.55
-2.07
-2.32
6.33
-3.25
-1.43
-4.12
-0.49
-4.83
-8.98
-29.77
6.82
-3.95
-0.93
-0.25
1.53

Cents

0.93

6.28

7.00
1.20

10.94
8.28

3.20

10.00

0.45

4.17

1.70

2.43

2.00

9.52

2012
High
Low
EUR
EUR
A K

Last
Close
EUR
K

Price
31/12/2012
EUR
T
31/12/12

31/12/2012
. .
31/12/2012

124.29
47.75
188.86

92.66
37.08
81.63

101.46
39.39
81.63

114.86
44.40
168.87

-11.67
-11.28
-51.66

113.87
0.278
0.047
0.177
0.300
0.048
0.019

83.34
0.185
0.040
0.134
0.230
0.043
0.014

92.29

104.69
0.251
0.044
0.175
0.263
0.045
0.018

-11.84
-5.14
-12.55
-4.44
-16.67

637.17
0.260
0.460
0.195
0.124
0.061
1.050
0.130
0.500
0.095
0.110
0.032
0.059

569.27
0.226
0.410
0.160
0.099
0.054
0.612
0.130
0.500
0.095
0.100
0.032
0.056

569.27
0.226
0.441
0.160
0.099
0.058
0.670
0.130
0.500
0.095
0.110
0.032
0.056

627.38
0.250
0.439
0.183
0.115
0.058
1.050
0.130
0.500
0.095
0.100
0.032
0.058

-9.26
-9.60
0.46
-12.57
-13.91
0.00
-36.19
0.00
0.00
0.00
10.00
0.00
-3.45

657.64

628.01

628.01
0.100
0.148
0.010
0.049
0.640
0.145
0.036
0.024
0.041
0.003
0.299
0.035
0.243
0.150
1.350
0.320
0.140
0.063
0.055
0.385
0.009
0.138
0.480
0.108
0.015
0.119
0.380
0.086
0.585
0.073
0.056
0.179
0.013
0.011
0.075
0.700
0.075
0.040
1.510
0.001
0.050
0.070
0.041
0.210
0.260
0.010
0.020
1.000

636.57
0.128
0.153
0.012
0.045
0.650
0.180
0.041
0.024
0.042
0.004
0.290
0.037
0.270
0.153
1.490
0.346
0.140
0.073
0.055
0.385
0.009
0.140
0.480
0.108
0.015
0.119
0.385
0.089
0.585
0.069
0.053
0.184
0.013
0.011
0.075
0.733
0.075
0.052
1.510
0.001
0.050
0.066
0.046
0.230
0.260
0.010
0.020
1.000

-1.34
-21.88
-3.27
-16.67
8.89
-1.54
-19.44
-12.20
0.00
-2.38
-25.00
3.10
-5.41
-10.00
-1.96
-9.40
-7.51
0.00
-13.70
0.00
0.00
0.00
-1.43
0.00
0.00
0.00
0.00
-1.30
-3.37
0.00
5.80
5.66
-2.72
0.00
0.00
0.00
-4.50
0.00
-23.08
0.00
0.00
0.00
6.06
-10.87
-8.70
0.00
0.00
0.00
0.00

0.166
0.230
0.043
0.015

% Change

since

April 10 - 16, 2013

financialmirror.com | CSE PRICES | 27

CSE
CODE
OASIS

K.

APPROVED INVESTMENTS / EENYTIKOI OPAN.

INVESTMENT INDEX
ACTIBOND GROWTH FUND
ACT

APOLLO INVESTMENT FUND

APOL

CYTRUSTEES INV. PUBLIC CO

CYTR

DEMETRA INV. PUBLIC CO.

DEM

DODONI PORTFOLIO
DOD

HARVEST CAPITAL
HCM

INTERFUND INVESTMENTS
INF

ISCHIS INVESTMENT
ISXI

REGALLIA HOLD. & INV.

REG

TRIENA INV. INCOME

TINC

TRIENA INV. CAPITAL

TCAP

TRIENA INTERNATIONAL
TINT

UNIGROWTH INVESTMENTS
UNI

SECTOR TOTAL / OIKO

SHIPPING COMPANIES SECTOR
SPECIAL CATEGORY /
AIANTAS INVESTMENTS
AD SHOPPING GALLERIES
ASTARTI DEVELOPMENT
CEILFLOOR
CHARILAOS APOSTOLIDES
CONSTANTINOU BROS.
CYPRUS AIRWAYS
D.H. CYPROTELS
D&M TELEMARKETING
DOME INVESTMENTS
EFREMICO HOLDINGS
EMPIRE CAPITAL INV.
EUROPROFIT CAPITAL
FINIKAS AMMOCHOSTOU
FIRSTDELOS GROUP
KANIKA HOTELS
KARYES INVESTMENTS
KNOSSOS INV.
K. KYTHREOTIS HOLDINGS
LASER INVESTMENT GROUP
LIBRA GROUP
L.P. TRANSBETON
NEMESIS CONSTRUCTIONS
O.C. OPTIONS CHOICE
ORPHANIDES
PIPIS FARM
ROLANDOS ENTERPRISES
SAFS HOLDINGS
SEA STAR CAPITAL
STARIO INVESTMENTS
SUPHIRE HOLDINGS
USB BANK
SECTOR TOTAL / OIKO

AIAS
AD
AST
CFL
CHAP
CBH
CAIR
DHH
TLM
DOME
EFR
EMP
ERP
CONF
ACS
KAN
KAR
KNO
KYTH
LAS
LHG
TRB
NEM
OPT
ORF
PIPF
ROL
SAFS
SEAS
STAR
SUP
USB

Number

Nominal

Market

Book Value

Shares
('000)
A

Value
euro
A
EUR

Cap.
('000)
K.
EUR

Per Share
euro

Price to

Profit/(Loss)

Book Value
2011
Times
EUR ('000)
T
. .
.

NAV

Disc/Prem

0.0379
0.2802
0.2682
0.7239
0.0070
0.0668
0.1709
0.0630
0.0291
1.0430
2.1427
0.6125
0.2300

-55.15
-68.95
-69.80
-71.54
-57.14
34.73
-69.57
-31.75
-31.27
-23.30
-6.66
-15.10
8.70

2011
58 430
56 147
44 494
200 000
282 483
14 000
56 545
11 000
20 247
2 729
2 729
1 364
13 468

81 202
128 936
99 925
5 055
50 000
160 714
391 155
157 138
7 700
25 000
11 385
47 853
31 344
49 385
72 562
60 250
2 000
21 827
42 450
61 739
189 377
8 571
67 770
46 355
80 966
9 660
54 166
70 220
629 785
38 581
124 009
90 499

0.17
0.27
0.30
0.87
0.02
0.17
0.51
0.51
0.09
0.85
0.85
0.85
0.17

993
4 885
3 604
41 200
847
1 260
2 940
473
405
2 183
5 458
709
3 367
68 325

0.21
0.17
0.35
0.03
0.35
0.35
0.086
0.17
0.12
0.43
0.43
0.87
0.09
0.10
0.34
0.35
0.43
0.17
0.17
0.06
0.01
0.35
0.17
0.17
0.35
0.35
0.17
0.17
0.04
0.17
0.09
0.57

162
13 023
5 496
207
2 000
12 375
9 779
629
23
15 000
285
29 190
752
148
7 256
7 833
380
218
1 910
8 582
379
1 971
14 232
417
1 376
773
2 925
70
6 298
77
1 240
58 824
203 831

0.1745
0.06
0.02
-1.21
0.12
-3.03
-0.12
-0.20
-0.05
1.30
0.086
0.05
0.20
0.0100
0.29
0.67
0.2229
0.11
0.45
0.06
-0.38
0.41
0.50
0.004
1.49
0.18
0.28
0.000
-0.06
0.05
-0.12
0.43

1 073 508

MARKET TOTAL / OIKO AOPA

-98.85
1.68
2.50
-0.03
0.33
-0.03
-0.20
-0.02
-0.07
0.46
0.29
12.20
0.12
-70.00
0.34
0.19
0.85
0.09
0.10
2.46
-0.01
0.56
0.42
2.25
0.01
0.44
0.20
3.33
-0.16
-0.08
1.51

-737
-4 301
-10 771
-14 853
-6 892
-255
-9 493
-86
-150
331
-136
-36
-403
-47 782

9M
2011
EUR ('000)
K
2011

9M
2012
EUR ('000)
K
2012

2012
EUR ('000)

.

9M '11

9M '12

2012

-8 799

-3 229

-8 799

-3 229

9M '11

9M '12

Profit/(Loss)

4
139
-2 774
-2 697
-2 559
-22
-443
-251
-182
155
-1 921
12
-383
-10 922

2011

2012

-69
-12 265
-6 400
-2 974
-5 512
-3 840
-23 885
-9 100
-243
-701
35
-4 283
-219
-1 465
-24 581
-77
-180
87
621
-10 339
-11 700
-438
2 145
-1 484
-8 648
-1 879
-328
-1 953
-15 879
-3 735
-60
-8 961
-158 310
-5 499 980

18

-17 728

18

-17 728

-1 014
-12 265
-6 400
-217
-11 266
-1 569
-55 832
-9 100
-391
-70
35
6 553
-2 111
-1 465
-220
-77
-56
87
-3 606
-713
-11 700
-438
35
494
-8 648
-959
-410
-450
-15 756
921
-60
-824
-137 492

-1 166 383

-1 909 991

-348 004

P/E ratio
2012

Earnings
Per

Dividend
Per

Dividend
Yield

Share
2011/12
Cents

Results

Share
2012
Cents

Cents
0.01
0.25
-6.23
-1.35
-0.91
-0.16
-0.78
-2.28
-0.90
5.68
-70.39
0.88
-2.84

Cents

11.00

13.75

2012
High
Low
EUR
EUR
A K

572.39

450.90

Last
Close
EUR
K

Price
31/12/2012
EUR
T
31/12/12

31/12/2012
. .
31/12/2012

450.90
0.017
0.087
0.081
0.206
0.003
0.090
0.052
0.043
0.020
0.800
2.000
0.520
0.250

546.03
0.017
0.115
0.119
0.250
0.004
0.078
0.048
0.043
0.020
0.800
2.000
0.520
0.250

-17.42
0.00
-24.35
-31.93
-17.60
-25.00
15.38
8.56
0.00
0.00
0.00
0.00
0.00
0.00

0.002
0.101
0.055
0.041
0.040
0.077
0.025
0.004
0.003
0.600
0.025
0.610
0.024
0.003
0.100
0.130
0.190
0.010
0.045
0.139
0.002
0.230
0.210
0.009
0.017
0.080
0.054
0.001
0.010
0.002
0.010
0.650

0.002
0.101
0.055
0.041
0.060
0.070
0.020
0.002
0.003
0.650
0.020
0.600
0.024
0.009
0.100
0.130
0.210
0.005
0.045
0.139
0.001
0.230
0.210
0.009
0.017
0.080
0.054
0.001
0.014
0.002
0.010
0.660

% Change

since

0.00

n/a

n/a

-1.25
-9.51
-6.40
-4.29
-22.53
-0.98
-14.27
-5.79
-5.08
-0.28
0.31
13.69
-6.73
-2.97
-0.30
-0.13
-2.80
0.40
-8.49
-1.15
-6.18
-5.11
0.05
1.07
-10.68
-9.93
-0.76
-0.64
-2.50
2.39
-0.05
-0.91

1.12

0.06

0.03

0.14

0.10

0.120

0.045

1.87

4.00

19.05

source: Eurivex Ltd.

PAT:Profit After Tax

NAV: Net Asset Value

Bold: Final results

EPS: Earnings per Share based on existing number of shares.

P/E: Price to Earnings ratio. Weighted P/E ratio: Calculated based on market cap weighting of profit reporting companies,
Book Value: According to our estimates. N/A Indicates Not Applicable, Price 31/12/2009 is the closing price or in case of New Listings the opening price.

EMERGING MARKET (N.E.A.)

CONSTANTINOU BROS PROPERTIES
CYPRUS LIMNI RESORTS & GOLF
ITTL TRADE TOURIST & LEISURE
INT'L LIFE GENERAL INSURANCE SA
ORCA INVESTMENT PLC
P.C. SPLASH WATER PUBLIC CO.
WARGAMING PUBLIC CO.
ECHMI S.A. INVESTMENT CONSULTANTS
EPILEKTOS ENERGY S.A.
KERVERUS IT (CYPRUS) LTD
C.O. CYPRUS OPPORTUNITY ENERGY
BROZOS IVY PUBLIC
INTERLIFE GENERAL INSURANCE SA
TOTAL

CSE Code
/CBAM
/LIMNI
/ITTL
INLE
/ORCA
/PCSW
/WG
EXMI/
/EPIEN
/KERV
/GAS
/BRO
/INLI

No. of Shares
(000)
1 950
300 000
100 000
8 057
1 200
35 052
3 400
321
10 906
1 810
8 390
6 500
18 568

Market Cap
EUR (000)
36 855
297 000
75 000
21 834
14 280
42 062
3 400
1 541
43 624
2 552
13 844
10 010
7 520
569 522

Latest price Nominal

EUR
Value EUR
18.90
0.01
0.99
0.10
0.75
0.50
2.71
1.00
11.90
0.01
1.20
0.25
1.00
0.10
4.80
1.00
4.00
0.32
1.41
1.00
1.65
0.01
1.54
0.20
0.41
0.59

Listing
Date
29/3/10
29/3/10
06/8/10
21/7/11
10/9/10
10/10/11
2/11/11
10/04/12
28/06/12
29/06/12
17/07/12
11/09/12
17/10/12

WARRANTS
ALKIS HADJ. FROU-FROU (WAR. 2015)
AMATHUS NAVIGATION (WAR.07-2013)
TOTAL

EMERGING MARKET

Ignores weighted number of shares in circulation

Forecasted profits are liable to change without notice and responsibility

No. of warrants Mkt Cap

(000)
(00)
24831
25
17606
176
224

Exercise Period

Exercise Price
euro cents

Expiry Date

20-30 Jun 2001-2015

1-15 May & 1-15 Nov 07-13

173
20c or EUR 35c

30-06-2005
15-11-2013

CSE Code No. of Bonds

(N.E.A.)

Latest
Close
0.001
0.010

Market Cap

Latest price

Listing

Latest

EUR

EUR

Date

NAV

GreenTea SA

GRTEA

1 040

104 000 000

100 000

8 Nov 2011

N/A

Protean Global Futures (Perpetual Notes)

PGFL

650

65 000 000

100 000

1 Dec 2012

N/A

Disclaimer: The commentary appearing on this page is for indication purposes only and Eurivex does not take any responsibility for investment action taken. Nothing in this report should be considered to constitute investment advice. It is not
intended, and should not be considered, as an offer, invitation, solicitation or recommendation to buy or sell any of the financial instruments described herein. Trading on leverage is very risky and may lead to losses.

April 10 - 16, 2013

28 | BACK PAGE | financialmirror.com

Profits next hurdle for bulls as rally slows

The stock markets robust rally was slowing even before
Fridays jobs report, but the red flag sent up by the weak payrolls data makes the path to more gains less secure.
It means the bulls will have to look to earnings for a way
to keep the rally going. The S&P 500 hit an all-time closing
high last Tuesday, but lately defensive stocks have been leading the charge, and notable growth indexes are slipping.
This rotation has many thinking the long-awaited market
correction is nigh. A 3% decline in the Russell 2000 index last
week seemed to be a confirmation of the trend.
Momentum I think has been slowing a bit, and it would
be interesting to see if this is just a one-session sell-off,
Bruce Zaro, chief technical strategist at Delta Global Asset
Management in Boston, said about Fridays decline.
In the first quarter, the benchmarks healthcare index
added 15.2% and utilities gained 11.8%, besting the broad
S&P 500s 10% gain.
The transition into defensive stocks may respond to
investors taking into account the effect of higher payroll
taxes this year and the $85 bln in government spending cuts
that started to trickle at the beginning of the year.
The shift is a rotation into sectors less affected by a shortterm slowdown in the consumer, said Eric Kuby, chief
investment officer at North Star Investment Management
Corp in Chicago.

and negative outlooks have been predominant ahead of earnings season. In fact, the negative-to-positive guidance ratio
from S&P 500 companies is at its highest since the third
quarter of 2001, according to Thomson Reuters data.
At 4.7, the ratio is the sixth-highest among 69 readings
dating to 1996.
Companies understand that since the economy is weak
theres no reason to be a hero and give guidance you cant
beat, said Nicholas Colas, chief market strategist at the
ConvergEx Group in New York.

EARNINGS HOLD THE KEY

Earnings season starts in earnest this week, with the highlight coming from JPMorgan Chase & Co and Wells Fargo &
Co. Details on Wells Fargos earnings will be dissected for
clues on the health of the housing market.
Overall, S&P 500 earnings are expected to have risen 1.5%
last quarter, down from a 4.3% gain expected at the start of
the year, according to Thomson Reuters data.
Investors are really waiting for the earnings season on
balance to disappoint, Zaro said.
Companies have caught up on the lowered expectations,

F5 Networks was the latest and one of the most dramatic

examples of lowered earnings expectations. The network
equipment maker partly blamed lower government sales for
its profit warning late on Thursday, which erased almost a
fifth of its market value on Friday.
In past quarters, revenue beats have taken the focus off
the bottom line as investors were expecting the stronger
economy to translate into more sales, but that may not be

the case this time around.

At this point earnings are going to be perhaps more
important than revenues only because we know Q1 was only
a so-so quarter for the economy, Colas said.
Its not going to be a surprise if revenues are a little bit
light. Where we really have to make sure the numbers work
is at the earnings level.

BUSY WEEK FOR THE FED

The Federal Reserve could be this weeks wild card.

Indications of renewed
support for lose monetary policy - or the slightest hint in the direction
of tightening - have triggered wild moves in the
market.
The minutes of the
March FOMC meeting
are due on Wednesday
and market participants
will look for insight into
the debate regarding the
amount and duration of
bond purchases the U.S.
central bank is executing
monthly.
The hawkish argument
- a reduction of stimulus was dented by Fridays job
report, so any mention of
it in the minutes may not
trigger panic. But more
than a dozen speeches by various Fed officers this week could stir things up.
The economic reports calendar is light except for consumer data. Retailers are expected to post a 1.9% rise in sales
for last month, compared with a gain of 2.9% in March last
year when same-store sales figures are published Thursday.
The Commerce Department posts its own retail sales figures on Friday, followed by the Thomson Reuters/University
of Michigan survey of consumers.