April 24 - 30, 2013

2 | CYPRUS | financialmirror.com

Stelios (and his 1.7 bln) regains top spot

as richest Greek in UK
Sir Stelios Haji-Ioannou has regained his number one
spot from Alki David among 17 Greeks and Greek Cypriots
profiled in the 25th anniversary issue of the Sunday Times
Rich List. Stelios was originally listed as No.1 in the Greek
Rich Lists first issue in 2007, compiled by Philip Beresford.
The Easy empire founders wealth has increased 33% since
2012 and is now valued at GBP 1.7 bln. He is also positioned
16th in the Sunday Times Rich Lists Top 20 Fastest
Growing Fortunes.
Other notable entries include, Sir John Zochonis (No.
42) in the Giving List, donating GBP 6.8 mln of his fortune
to charity; 42 year old retired hedge fund manager Chris
Rokos, listed in the Political Donors List, giving 99,000
pounds to the Conservative Party; and, Theo Paphitis and
Theo Karparthios listed in the UK Fashion List.
The Greeks in the 2013 Sunday Times Rich List:
1. Sir Stelios Haji-Ioannou & family, 1700 mln,

aviation/leisure;
2. Aristotelis Mistakidis, 1525 mln, commodities;
3. Alki David & the Leventis family, 1490 mln, industry;
4. Chris Lazari, 728 mln, property;
5. John Christodoulou, 678 mln, property;
6. Michael Lemos, 605 mln, inheritance;
7. Andreas Panayiotou, 365 mln, property;
8. Sir John Zochonis & Family, 330 mln, soap;
9. Chris Rokos, 230 mln, hedge funds;
10. Alexander Goulandris & family, 200mln, shipping;
11. Anthony Green & family, 200 mln, soap;
12. Trifon Natsis, 180 mln, hedge fund;
13. Theo Paphitis, 180 mln, stationery & lingerie;
14. Stelio Stefanou, 140 mln, business services;
15. George Michael, 100 mln, music;
16. Theo Karpathios, 81 mln, fashion;
17. Panico Panayi, 90 mln, bingo & property.

FTSE posts biggest gain since January

Britains blue chip share index jumped 2% on Tuesday on
strong earnings reports and after weak German data fuelled
expectations for a rate cut in the euro zone, the UKs main
export market. The FTSE 100 rose 125.50 points, or 2.0%, to
6,406.12, its best performance since January 2.
Speculation mounted that the ECB would act sooner
rather than later to boost growth in the euro zone after data
showed business activity in Germany shrank in April.
The Bundesbank may become a bit more dovish with
regards to interest rates. There is still the chance of a rate
cut, a London-based trader said.
Rate cut expectations lifted European stocks markets as
well. In London, investors were also encouraged by a betterthan-expected start to the earnings season.
Gains across Europe today can in part be put down to the
prospect of an ECB rate cut. However, specifically for the

FTSE 100 the numbers released by ARM Holdings and AB

Foods have beaten a market with pretty low earnings expectations, said Adam Seagrave, trader at Saxo Bank.
Chip designer ARM Holdings led the gainers, jumping
11.9%, after its first-quarter profit topped analyst forecasts,
driven by a boom in smartphones and tablet computers.
The technology sector was also lifted after U.S. video subscription service Netflix posted better-than-expected firstquarter growth.
Associated British Foods surged 8.1% after the company
predicted its Primark discount clothing chain would remain
Britains fastest-growing major retailer this year.
Saxo Banks Seagrave said that so long as central banks
globally maintained loose monetary policy and corporate
earnings remained buoyant then equities as an asset class
present a particularly attractive yield.

MINERS LAG

Mining stocks, however, continued to lag broader market

gains after data from top commodities consumer China showed
activity in the countrys vast factory sector barely grew in April.
Shares in gold miners, such as Fresnillo that has lost 40% in
the year-to-date, have suffered in particular as the price of gold
has slumped to two-year lows. Some of the resources stocks,
(such as) Fresnillo and Randgold, arent joining in the broader
rally and there is still some downside on these types of stocks,
Richard Curr, head of dealing at Prime Markets, said.
Analysts have cut Fresnillos and Randgolds earnings per
share estimates by 9% and 6%, respectively in the past week,
while short interest in the former is up 21% in a week.
(Miners) Kazakhmys and Petropavlosk (down 3.8 and
0.4%) are our favourite picks to short sell from here, Prime
Markets Curr said.

Wall St rises on strong earnings, Apple up 1.7%

U.S. stocks climbed on Tuesday as strong earnings from
insurer Travelers Cos and others put shares on track for a third
straight day of gains, though worries about the strength of the
global economy were not far from investors minds.
Earnings drove Wall Streets 1% advance, with Netflix and
Coach Inc among the S&P 500s top percentage gainers. Netflix
soared 25.3% to $218.52, while Coach jumped 11% to $56.16,
both posting profits above expectations, while Netflix also
reported strong subscriber growth.
The S&Ps index of IT stocks gained 1.5%, while Apple rose
1.7% to $405.39 ahead of its results, due after the closing bell.
Tech has lagged other S&P 500 sectors in the last month as
investors sought more defensive areas.
The earnings season has been largely positive, with more
than 68.9% of S&P 500 companies that have reported results so
far beating expectations. In a typical quarter, 63% surpass
estimates. Still, there have been a number of high-profile
disappointments, including IBM and General Electric.
The earnings that are being delivered are through efficiency
and productivity, said Bucky Hellwig, senior vice president of
BB&T Wealth Management in Alabama. If Im a businessman,
Id rather have my companys sales growing than making more

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money through cost cutting.

Analysts see earnings growth of 2.1% this quarter, up from
expectations of 1.5% at the start of the month.
The Dow Jones industrial average gained 143.61 points, or
0.99%, to 14,713.70. The Standard & Poors 500 Index rose
15.89 points, or 1.02%, to 1,578.39. The Nasdaq Composite
Index climbed 39.29 points, or 1.22%, to 3,272.84.
Equities have steadily advanced in 2013, leading many
analysts to call for a correction, although major indexes have
rebounded off declines. Still, data pointing to economic
weakness in the U.S. and China have raised questions about
whether the rally will continue.

Data due later in the week is expected to show the U.S.

economy accelerated in the first quarter, but that pace is not
expected to last with recent data suggesting growth backed off
heading into the spring.
A softer second quarter is already baked into market
expectations, Hellwig said, adding that strength will need to
pick back up in the second half of the year.
Texas Instruments shares shot up 3% to $35.86 after the
company said improving demand for its chips would lead to
growth in the current quarter, while DuPonts adjusted
earnings beat expectations. DuPont, a Dow component, also
raised its dividend, sending its stock up 3.4% to $52.12.

Luxembourg to back FTT challenge

Luxembourg will support Britains legal challenge to
Europes proposed Financial Transaction Tax (FTT), the
countrys finance minister, Luc Frieden, said on Monday.
As Europes largest financial centre, London has the most to
lose if finance firms move their trading operations to parts of the
world free from such taxes.
We are very sympathetic to the stance of the UK ... We will
certainly bring our support to the case that has been started in
the European Court of Justice, Frieden said during a question
and answer session at the City Week banking conference.
The British government last week filed a deadline day
challenge to the tax at the European Court of Justice.
A successful legal case against the tax would hinder its
application outside those countries that sign up to it and could
significantly cut the amount of revenue it brings in. As the
biggest trading centre in the EU, Britain would probably end up
collecting much of the tax even though it wont be applying it.
Germany has argued that banks, hedge funds and highfrequency traders should pay for a financial crisis that began in
mid-2007 and exposed sovereign debt problems that forced euro

zone countries to bail out peers such as Portugal and Greece.

Frieden said that Luxembourg was looking at whether to
formally add its signature to the UKs challenge, rather than
just voice support. Speaking at the same conference, Thomas
Donohue, head of the U.S. Chamber of Commerce, also
stressed his countrys objections to the plans.
European leaders are
moving forward with proposals that are non-starters
for the United States, for
example the financial transaction tax and cap on bonuses for U.S. employees.
We will not allow the FTT
to happen and we are going
to be very careful how compensation is capped, regulated and dealt with like price
control, he said.

April 24 - 30, 2013

financialmirror.com | CYPRUS | 3

Tumble in March Russian tourism arrivals

questions assumptions
Tourist arrivals from Russian tumbled by
32% over the year earlier in March, calling into
question reports that Larnaca airport was
flooded with Russians coming to get their
money out of the country as the banks closed
for nearly two weeks and capital controls were
imposed.
The number of Russians visiting dropped to
7,686 in March from 8,600 in March 2012,
after a drop of 3.6% in February.
Prior to that, Russian arrivals had been
driving tourism growth in Cyprus, rising by
42.8% in 2012, 49.2% in 2011 and 50.5% in
2010, while arrivals from the UK, fell cumulatively by more than 10% in the same period.
Tourists from Russia had become the second largest market after the UK, with 477,119
arrivals in 2012, compared with 959,459 for
the UK.
Arrivals from Greece also dropped sharply

in March, by 15.2% to 8,056, while arrivals

from Germany declined by 2.5% to 11,113.
The only major market showing growth
was the UK, where arrivals in March (Western
Easter was celebrated in that month) rose by
12.2% to 39,170, having fallen by 6% in 2012.
UK arrivals might also have been boosted
by the swarm of journalists who arrived on the
island during the banking crisis, probably most
of which were from Britain.
For the first three months of the year
tourism arrivals were down by 10.2%. This also
calls into question the idea that Cyprus can
rely on tourism to replace banking and financial services, which have taken a severe blow
since the crisis.
Until March financial and professional services were the only two main private sectors
that had continued to grow (albeit at a slower
pace) throughout the six-quarter recession.

They were also the main two sectors creating jobs, particularly among young, educated
Cypriots.
According to a recent report by Fiona
Mullen and Marina Theodotou published by
PwC, employment in business and international services rose on average by 3.9% per
year in 2007-011 whereas employment in
tourism declined by 1.7% in the same period.
Calls abroad that the banking sector must
ne shrunk were a key reason for the
approach taken by the Eurogroup for its partial
bailout of Cyprus.
The Cyprus government will contribute
EUR 13 bln, primarily to resolve and recapitalise the banking sector, and the European
Support Mechanism and the IMF will contribute EUR 10 bln, primarily to cover maturing debt and budgetary needs.
www.sapientaeconomics.com

EIB approves 100 mln loan for key investments

The European Investment Bank has
approved a loan of up to EUR 100 mln
for key investments in Cyprus. The loan
will be used for investments in priority
areas identified in the National Strategic
Reference Framework, which include
improving the competitiveness of the
economy, promoting sustainable
development, and investing in skills and

innovation. It will therefore contribute to

the smart, sustainable and inclusive
growth of the Cypriot economy in line
with the Europe 2020 strategy.
This loan builds on the EUR 200
mln loan provided in 2012 which has
been committed to support a large
number of schemes in the areas of solid
waste management, renewable energy,

skills and innovation and urban

development, said EIB President
Werner Hoyer.
The new loan will strengthen the
productive base and competitiveness of
the Cypriot economy and provide
financial added value due to its long
tenor and favourable terms through the
JASPERS initiative, Hoyer said.

Nikolas raises
800 for charity
Junior golf champ Nicholas Pitiris has raised
800 euros so far this year as the youngest
volunteer and fund raiser for the cancer patients
and friends association, Pasykaf. The money will
go to the charitys awareness programme
encouraging healthy eating and sports activities
among the youth, where a rising trend in obesity
is increasing the risk of cancer and other illnesses.
Nicholas will be raising a further 10 euros for
every par and 50 euros for every birdie he scores
this year, thanks to a sponsorship deal with
Deloitte and PrimeTel. The 11-year-old champ,
who has been playing in U.S. and international
circuits for the past three years, will also head the
Junior Charity Tournament at Minthis Hills in
Paphos in September, organised by Golf4Hope.

April 24 - 30, 2013

4 | CYPRUS | financialmirror.com

Mission (im)possible?
l Cyprus-Lebanon-Israel

in East Med oil and gas alliance? Basin may hold 100 tcf;
Cyprus goes ahead with natgas plant

Cyprus has not yet realised it, but it has been given a golden opportunity to help develop a regional energy roadmap with
economic and political benefits to the island and its neighbours.
President Nicos Anastasiades announced on Friday, within
the framework of a package of measures to revive the economy,
generate growth and create jobs that his government will go
ahead and build a natural gas liquefaction terminal in the
Vassilikos area.
This plant should, initially, satisfy the islands energy needs,
with ready liquefied natural gas imported over the next few
years and coming on stream into the national electricity grid in
order to reduce carbon emissions generated by the EACs diesel
powered stations.
With an estimated 100-120 trillion cubic feet of natural gas
reserves waiting to be explored and pumped out from offshore
gasfields lying between Cyprus, Israel and Lebanon, the
Vassiliko terminal could also act as a common production platform for the eastern neighbours that have yet to decide on a
similar liquefaction plant.
This is an issue that President Anastasiades will discuss during his visit to Israel in mid-May, with prospects of cooperation
in oil and gas production and exports.
Israel, that is facing immense opposition from environmental groups not to build such a plant on its soil, also faces the
national strategic issue of dealing with exports of own
resources, as regional conflicts and the security of its borders
have imposed a necessity to store as much of its own energy
supply as possible.
Cyprus must first get its LNG programme going and then
conclude a commercial agreement with Noble. Combined with
the political decision to built the plant, this would give Cyprus
some more credibility, even within the world gas industry, said
energy analyst Gary Lakes, who chaired the Cypriot-Greek Oil
& Gas Summit held in Limassol last week.

Noble Energy is expected to conclude its appraisal drilling

within its Block 12 in the Cyprus Exclusive Economic Zone in
June, after which it will have a clear picture of the gasfields
potential, currently estimated at 7 tcf. The company has already
confirmed some 30 tcf of reserves within its Israeli licenses
adjacent to the Cyprus EEZ, with Cypriot officials optimistic
that all 12 blocks could contain anything from 30tcf and higher.
Noble has strong indications through the evaluation of
their 3D survey data that there is another gas field in Block 12,
possibly of the order of about 3-5 tcf, Charles Ellinas, executive
chairman of the Cyprus National Hydrocarbons Company
(Kretyk) said at the same conference, organised by IRN.
There are strong indications of hydrocarbons in Blocks 2,
3, 9, 10 and 11 (awarded to) /KOGAS and Total and all
indications are that Block 9 holds substantially more gas
resources than Block 12, Ellinas said.
Total is expected to be drilling for oil as well, while it is a
front runner in the pre-qualifying round for oil and gas exploration within Lebanese waters, despite the Cyprus EEZ agreement not yet approved by the parliament in Beirut.
A recent visit by Trade and Energy Minister George
Lakotrypis to the Lebanese capital is expected to have raised
this question, that should now reach its final stage.
However, although there is as yet no peace agreement
between Lebanon and Israel, international energy experts do
not exclude some sort of cooperation over the years, if the political tensions between the two is diffused.
In any case, Lebanon will be opening its bidding round at
the end of April and will close by November, which means that
it does not plan to award any blocks any time before March
2014, with exploration expected to take another three years.
Experts believe that Lebanon holds some 30 tcf of natural gas
reserves towards its southern EEZ blocks.

Georges Mosditchian, Europe and Central Asia Manager for

the French group GEP-APTP, also posed a rhetorical question
at the Limassol conference last week, suggesting that Beirut,
Nicosia, Jerusalem and Paris provide new opportunities in the
Mediterranean gas industry. He said that there are some major
technological issues and a team is already in the region investigating how to develop cooperation in the eastern
Mediterranean.
Meanwhile, Kretyks Executive Director Solon Kasinis also
told the Limassol conference last week that the second licensing round for Cyprus closes on May 26 and that the government may extend that deadline, adding that Lebanon is expected to decide on ten natural gas blocks in May and that there are
prospects for synergies with oil companies exploring within the
Cyprus EEZ.
Lebanons new Ambassador to Cyprus, Youssef Sadaka, said
during the presentation of his credential to President
Anastasiades, that he hoped our two countries continue to
cooperate closely for the exploitation of the respective Exclusive
Economic Zones for the benefit of our two nations.
In his reply, President Anastasiades said we shall be concentrating on developing various sectors of the economy,
such as shipping, tourism, infrastructure projects, education,
health, research and development and, of course, energy. The
discovery of natural gas reserves within Cyprus Exclusive
Economic Zone has created a new impetus for cooperation
between Cypriot and foreign businesses, including
Lebanese, he said.
He added that the creation of a network of natural gas
transportation projects in the Eastern Mediterranean will
strengthen regional energy security and attract foreign investments, leading to job creation, thus giving a necessary boost
not only to Cyprus, but also to the economies of the countries
in the region.

Georgiades: Gold sale not a priority

l Capital

controls could be eased in days or weeks

Cyprus seems to backing away from the sale of gold reserves

under the international bailout agreed this month and is still
exploring all options to meet its side of the deal, Finance
Minister Harris Georgiades said in an interview.
Georgiades also said he anticipated currency controls,
imposed after a chaotic bailout last month and which led to a
lockdown of the banking system for 15 days would be eased in
days or weeks.
Cyprus agreement to sell 400 mln euros worth of its gold
reserves was one of several shockwaves its progress towards

a bailout sent through European financial markets earlier

this month.
The amount is small but the precedent of a euro zone
central bank being pushed to dispose of some of its reserves
helped drive the biggest fall in gold prices in 30 years. Investors
worry central banks in some of the euro zones struggling
larger economies could eventually be pushed to follow Cyprus
example.
But while Georgiades said the gold sale was one of several
commitments to the islands international lenders, he said it
was not an issue which took priority.
We shall do whatever it takes, we shall meet all fiscal
targets. I am sure we shall succeed in gathering the amounts
which remain our responsibility in order to avoid any need to
come back with a new (adjustment) programme, Georgiades
told Reuters in an interview on Monday night.

FRACTIOUS PARLIAMENT

Teetering on the edge of default, Cyprus last month

wound down Popular Laiki, its second largest bank and
raided depositors uninsured savings above 100,000 euros at
Bank of Cyprus to fund a recapitalisation. Both banks were
badly hit by their exposure to Greece.
The haircut on deposits is expected to reach 44%, with
the final amount concluded after Laikis operations and
balance sheet is fully absorbed by Bank of Cyprus.
It has to come up with most of the 23 bln itself, with only

10 bln made available by lenders and a fractious parliament,

which had rejected milder terms of a broad-based bail-in on
bank depositors in March, will have to approve the bailout in
coming days.
I think parliament will acknowledge there is no
alternative at this point, Georgiades said, adding that most
bailout terms, such as increasing corporate tax, spending
cuts and tax increases, had already been approved virtually
unanimously by lawmakers in by-laws.
Cyprus imposed capital controls at the end of March,
worried about a flight of funds from a banking system flush
with cash from Russian and European businesses, but also
from many overseas Cypriots.
Now islanders are on a cash withdrawal limit of 300 euros
a day and have a 2,000 euro ceiling on what they can take
abroad, while businesses cannot make transfers exceeding
20,000 euros overseas unless they are vetted by the central
bank.
Firms have complained the restrictions are stifling, while
Russia has warned it will only restructure its own loan to the
island if its interests here are protected.
I am pretty confident these necessary but temporary
measures will not be needed in the next days or weeks,
Georgiades said.
Asked whether measures would be eased in two, or six
months, Georgiades said: Definitely not six months. I am
optimistic we shall be able to proceed much sooner.

Romania finds solution for BOCY unit

Authorities in Romania and Cyprus have found a solution
for the local unit of Bank of Cyprus (BoC), which has been
closed for more than two weeks to find a buyer.
Thanks to a good cooperation we eventually found a
solution. Deposits are protected and will be under Romanian
authority, Adrian Vasilescu, an adviser to Central Bank
Governor Mugur Isarescu, told Reuters.

The solution will need two more days for technical

proceedings before disclosure, Vasilescu said, declining to
comment on whether a buyer had been found.
Two of Cypruss banks operate in Romania: Bank of
Cyprus and Marfin, a unit of Popular Bank Laiki. Together,
the two control less than 1.3% of assets in the Balkan
countrys banking system.

April 24 - 30, 2013

financialmirror.com | CYPRUS | 5

Why have construction output prices not fallen?

followed suit, cutting output prices. But they
carried on cutting long after construction
input prices had started to rise again.

By Fiona Mullen

Developers have seen

a deep cut in profit margins

Director, Sapienta Economics Ltd

Output in construction recorded its steepest drop in 2012 since

the long recession in the sector that began in the second half of
2008, with the construction production index falling by 22%
compared with the previous year.
Construction output also recorded its steepest decline on a
quarterly basis, falling by 27% in the fourth quarter compared with
the same period of 2011, to 57.8 (2005=100).
This is the lowest index on records that began in 2000. It
means that construction output is only around quarter of the size
it was 12 years ago: in the first quarter of 2000, the construction
output index was 76.5 (2005=100).
The decline in 2012 was across both subsectors: building
construction fell by 19.8%, while civil engineering tumbled by
27.3%.
The steeper decline for civil engineering is probably related to
building projects in the run-up to Cyprus holding the EU
presidency in the second half of 2012. Civil engineering projects
recorded a small 1.2% increase in 2011.
As regards building construction, this has been hit by
oversupply built up during the boom period and tighter credit
conditions thereafter.
In an earlier Financial Mirror article, Sapienta Economics
explained how by 2011 Cyprus had a total housing stock of 431,059
but only 309,300 households to fill them, meaning a housing
oversupply of around 120,000, which was too large to be filled by
holiday home-buyers.

Construction output prices down in Q4

Despite the decline in construction, output prices have taken a
long time to respond. Output prices fell by only 0.4% overall in
2012 although they fell by a steeper 2% year on year in the fourth
quarter. Does this mean that construction companies are still
squeezing the end-buyer for profits?
Probably not. The main reason for the slower decline in prices,
despite tumbling demand that should depress prices, is related to
the cost of materials inputs.
Input prices of materials, reported as the price index of
construction materials, are heavily influenced by oil prices.
As can be seen from the chart, input prices dropped after the
peak in mid-2008 but started to climb again from the beginning of
2009 and did not drop off until the last quarter of 2012.
This more or less matches the path of oil prices. According to
the Economist Intelligence Units monthly Global Outlook, Brent
crude fell from $97.66/barrel in 2008 to $61.86/b in 2009, then
climbed to $79.63 in 2010, $110.94 in 2011 and $111.97 in 2012.
It is expected to drop to $106.60 in 2013.
As input prices fell, the chart shows that developers in Cyprus

The result is a widening gap between the

amount developers pay for inputs and the
amount they can charge once the project is
completed. In other words, a deep cut in profit
margins. One can reasonably infer from the
rapid rise of unemployment among
construction workers that the developers have
responded to lower demand and tighter
margins by laying off staff. We can also assume that in some cases
the staff laid off have been replaced by cheaper and not necessarily
officially registered workers in their place. How to re-skill and
retrain the 6,717 unemployed construction workers registered at
the end of March so that they can be employable in other fields is
a huge undertaking with no easy answers. At least in Cyprus we
have a wealth of knowledge on what has and has not worked
elsewhere via Professor Chris Pissarides, the chairman of the new
economic advisory council, who won his Nobel Laureate through
research into labour markets.

April 24 - 30, 2013

6 | OPINION | financialmirror.com

Fast track growth needs some flexibility

EDITORIAL
The ink on President Anastasiades declaration for
growth and jobs announced last Friday has hardly dried
and it has already given rise to concerns that some of these
proposals will not meet the required targets.
Perhaps, the plans weakness lies in its initial focus on
only some areas: to support vulnerable groups, train
unemployed youth and graduates, create (some) new jobs,
enhance development and encourage green investments.
Within a month, he said, there will be a second package
of measures that will address employment, sustainability
and, hopefully, growth in the financial and services
sectors, technology and research, while plans will also be
underway to implement state reforms and institutional
changes that will result in less government.

The problem with the first package is that with the

current dire situation in state coffers, any subsidies to be
paid for individual electricity bills, grants to install solar
panels and financial aid to rehire part-timers, as well as to
encourage some 6,000 jobs in the tourist sector, will drain
all funds that will come in from the Troika. Many other
unskilled workers will remain on the dole and will not be
able to find suitable jobs, losing the opportunity to earn
wages and resume contributions to the near-bankrupt
Social Insurance Fund, so that some day they, too, will
have a pension to look forward to.
What is needed is for some of the government services
to show a level of flexibility when a small company seeks a
tax rebate in order to hire out-of-work people. Some level
of leeway in the interpretation of the measures would go a
long way to ensuring that some people find jobs outside
the strict confines of the above mentioned categories and
some employers also secure the necessary funds to hire

unemployed workers.
With the tourist season about to begin, this sector will
immediately absorb the seasonal workers who have been
waiting for hotels and restaurants to re-open in order to be
called back by their previous bosses. Thus, the measures
will primarily benefit the hoteliers and the trade unions,
giving little regard to many more trying to find work in
other areas.
In order to ensure that the regulations are generally
adhered to, but also that some flexibility will be shown
where necessary, perhaps some senior officials from the
Ministry of Labour should be seconded to a Labour Task
Force that will oversee the implementation of the plan,
and also to approve or reject other cases that might be on
the verge of acceptance.
After all, for some workers and some SMEs, finding the
right financial aid will ensure their viability which is vital
in the present times.

Why and when Cyprus should plan to exit the Euro

A Euro exit by Cyprus today would bring major costs and
hardship, not least in the form of a steep devaluation. There is
also the matter of a small country attempting to go it alone.
These are both key considerations which rule out a Euro exit in
the foreseeable future.
The foreseeable future, however, does not extend very far.
Who foresaw the situation this country is in today? Unforeseen
events which can fundamentally change our situation are a real
possibility. Future developments may make an exit from the
Euro not only be desirable but necessary. Events outside our
control could force or persuade Cyprus to exit. These could take
a number of forms:
Euro zone break up: Despite some brave talk from its leaders, the Euro zone itself moves from one crisis to another. There
is no real sign of economic improvement, just the reverse. Faced
with continual economic recession, at some point members
may have no choice but to leave. Such talk was until recently
considered extreme or even eccentric. Today , even The New
York Times asks in a recent article Can European disintegration
be reversed? Notable economists and financial figures (e.g.,
George Soros) suggest that it cannot.
The members of the common currency would then have no
choice but to fall back on alternative arrangements, for their currency, their banks, financial regulations, etc. All such provisions
take time, in a situation in which very little time would be available. It is just for such complex, unforeseen situations, that
companies prepare contingency plans. Plans that may never be
used but which are a prudent preparation for possible future
events.
Political change. The Euro zones austerity programmes
and their disastrous economic results have given rise to new
political parties whose political platform is based on a Euro exit.
One of the most powerful political parties in Greece is committed to exiting the Euro. As Greece falls further into recession, Mr.
Tsiprass Syriza is gaining votes. The big winner in Italys recent

FinancialMirror
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masis@financialmirror.com
Greek Section Editor
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election was the five star party of Beppe Grillo a former comedian whose party is also committed to a Euro exit. Even in
Germany, there is a new party based on severing ties with lazy
southerners and returning Germany to the Deutsche Mark.

By Dr. Jim Leontiades

Cyprus International Institute
of Management
If such anti-Euro political parties gain power and there is
an exit by Greece, Italy, or any other country, Cyprus might
choose to follow, or not. But we should be prepared to make
the choice.
New Troika demands: The troika will be back. Its future

requests to the Cypriot government (and there will be many)

are an unknown quantity. Will they be acceptable? For the
time being we have to proceed on the working assumption
that they will. But recent events have shown that we cannot
count on the good sense and understanding of the Troika. We
should not rule out the possibility of some future outrageous
demands that may not be acceptable. If that is the case, an
alternative plan should be ready.
Cyprus Gas: Future gas discoveries by Cyprus would have
a bearing on our willingness and ability to exit the Euro. They
would have a positive impact on both the exchange rate problem a departing country would face as well as its geo political
position.
Whatever the cause and whatever the timing Cyprus
should have as a clear objective staying within the European
Union, even if it leaves the Euro. Here again, this will require
careful preparation.

Property owners the poor relatives

By George Mouskides
The majority of property owners in Cyprus belong to the
middle class. Civil servants, bank employees, those in the semigovernmental sector and mid-size businesses make up most of
the owners, while major property owners are only a very small
percentage of the population.
Despite all this, the state, unfortunately, is placing everyone,
the mega rich and the middle class, in the same bucket.
Had the government wanted to go after the major players
they would have taken into account someones overall wealth,
(bank deposits, stocks and bonds, immovable property, vehicles, boats, etc), while at the same time also factoring into the
equation someones obligations and liabilities. This should be
the starting point for imposing taxation.
Instead of following this practice the state agreed with the
Troika to impose taxes in the region of ?104 mln on property
ownership.
Which are the various taxes a property owner has to pay?
- Income tax and a defense levy on collected rents;
- Municipal taxes, as well as sewerage charge for the property;
- A 20% capital tax on profits whenever a property is sold;
- If someone buys a property, a transfer fee of max. 8% on

COPYRIGHT

No part of the Financial Mirror

newspaper, the Greek-language X
& A, the daily XpressOIKONOMIKH electronic PDF edition or

the price is paid and if the sale is of a newly-built building VAT

is imposed.
It is clear that buying or selling real estate in Cyprus is highly overtaxed, (one of the steepest in the EU).
The property tax had been relatively low up to now and so
shaped to affect only about 11,000 owners. This figure is now
bound to increase and affect the vast majority of property
owners.
Do we honestly want Cypriot as well as foreign investors to
put their hard-earned cash in the real estate sector? If the
answer is yes, the segmented and erratic approach of taxation
is not the path to take. We should rather devise a just and simple taxation framework, attractive to real estate investors. This
is the time for incentives, not new taxes.
In todays market, rent prices are taking a dive, their collection becoming increasingly difficult and taxes and levies are
multiplying.
This is a time when property owners are watching their
property values diminish daily and their selves becoming the
poor relatives of Cypriot society. We hope the government will
make a serious and educated assessment of all these factors and
take the proper actions.
George Mouskides is General Manager,
FOX Smart Estate Agency and a Licensed Estate Agent,
US Certified Public Accountant.

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April 24 - 30, 2013

financialmirror.com | COMMENT | 7

Minister Kasoulides visit to Israel - A political analysis

The visit of Foreign Minister Ioannis Kasoulides and Minister
of Commerce, Industry and Tourism, George Lakkotripis to
Israel was preparatory to President Nicos Anastasiades visit
scheduled for May 6-7. It took place, however, within a particular climate, characterised by two important events affecting
Cyprus-Israeli relations - the attempted rapprochement between
Turkey and Israel, and Ankaras threats aimed at hindering the
exploitation of the natural gas in Cyprus Exclusive Economic
Zone (EEZ).
As a matter of fact, the apology offered by Israeli Prime
Minister Benjamin Netanyahu to Tayip Erdogan concerning the

By Dr Andrestinos
Papadopoulos
Former ambassador of Cyprus
killing of nine Turkish citizens on the Mavi Marmara, after pressure by President Barack Obama and taking into account possible negative developments in Syria and Iran, created fears that it
might adversely influence Cyprus-Israeli relations. These fears
were dispelled, at the highest level, during a telephone conversation between Netanyahu and Anastasiades on April 4, at the initiative of the Israeli prime minister. It was confirmed that
Cyprus-Israeli relations will not be affected by this development.
The same stand was confirmed to Minister Kasoulides who
understood that there was a genuine will on the part of Israel to
strengthen relations.
It is of interest, therefore, to see how real the perceptions of
a rapprochement between Turkey and Israel are. The question to
be answered is whether Turkey will change policy. At this
moment her foreign policy is driving her away from the West
and aims at playing a leading role within the Muslim world. In
order to achieve this, she should attack Israel. Already Erdogan
has announced that he will visit Gaza to show support for

Hamas. One can imagine Israels reaction when he arrives in

Gaza as a liberator of the Palestinians. An Israeli commentator
characterised this decision as a slap in the face for Israel, the USA
and Mahmoud Abbas. Many have expressed doubts over the sincerity of Erdogans intentions. The Cypriot delegation sensed
Israels displeasure towards Turkeys protagonistic role in the
Muslim world, a role also sought by Egypt and Saudi Arabia.
On the question of energy, Turkey is playing tough geopolitical poker as she aims to secure the management of hydrocarbons in the region, through the participation of Turkish Cypriots
in the exploitation of the Cypriot EEZ, testing with her threats
the reaction of countries and companies. Cyprus
and Israel are facing this situation through their
cooperation in the field of energy, whose character is not only economic, but mainly strategic.
Cooperation is needed to exploit and transport
natural gas to Europe as well as the creation of
a terminal in Cyprus. It is only natural for Israel
to prefer having a second terminal outside Israel,
for obvious reasons, and consider Cyprus and
Greece as its natural bridge to Europe for transporting its natural gas.
It would have been nave to believe that Israel
wants to strengthen the role of Turkey when
transporting natural gas to Europe through
Cyprus and Greece strengthens its own position
through its contribution to Europes independence from Russia
and a future Islamic Turkey. During the discussion of these matters the presence of Minister Kasoulides gave a political dimension to the whole approach.
The cooperation in the field of energy also raised the question of cooperation in other fields such as health, technology,
research, agriculture, water development, tourism, and so
forth. On all these issues, there was a genuine will for cooperation on a permanent basis with the possibility of including
Greece as well.
The question of cooperation between Cyprus and Israel

enjoys widespread acceptance and the following simple fact testifies to its importance. Due to the presence in Israel of the
American Secretary of State, John Kerry all the meetings of
Premier Netanyahu were cancelled. However, as soon as he was
free he accepted the Cypriot delegation immediately. The one
who rendered properly the deeper meaning of the special relationship between Cyprus and Israel is the wise and seasoned
president of Israel, Shimon Peres, who projected the common
fate of the two countries by saying that if Cyprus is geographically an island, then Israel is politically an island.
The visit of Minister Kasoulides not only prepared the ground

of the forthcoming visit of President Anastasiades to Israel, but

also reconfirmed the commitment of the two new governments
to strengthen their cooperation.
If in January 2012 Nicos Anastasiades, when as DISY leader
visited Israel, was received as ambassador of closer cooperation
between Cyprus and Israel and a staunch supporter of a consistent and trustworthy pro-Israeli policy, now, his visit to Israel in
May as president of the Republic will usher in a new era of a
deeper geopolitical cooperation between the two countries with
a view to promoting peace and stability in the wider region of
the Eastern Mediterranean.

April 24 - 30, 2013

8 | COMMENT | financialmirror.com

Lending in the dark

The proliferation of Chinas opaque, loosely regulated (or
unregulated) shadow-banking system has been raising fears of
possible financial instability. But just how extensive and how
risky is shadow banking in China?
According to the China Banking Regulatory Commission,
shadow banking (all credit not regulated by the same standards
as conventional bank loans) increased from 800 bln yuan ($130
bln) in 2008 to 7.6 trln in 2012 (roughly 14.6% of GDP). Total
off-balance-sheet banking activity in China composed of credits to property developers (30-40%), local-government entities
(20-30%), and small and medium-size enterprises (SMEs), individuals, and bridge-loan borrowers was estimated to be as
high as 17 trln in 2012, roughly one-third of GDP.
The term shadow banking gained prominence during the
subprime mortgage crisis in the United States to account for
non-bank assets in the capital market, such as money-market
funds, asset-backed securities, and leveraged derivative products, usually funded by investment banks and large institutional investors. In 2007, the volume of shadow-banking transactions in the US exceeded that of conventional banking assets.
The Financial Stability Board has estimated that total global
shadow-banking assets in 2011 amounted to $67 trln, with the
US accounting for $23 trln, the eurozone for $22 trln, and the
United Kingdom for $9 trln. Chinese shadow banking totals
only about $2.2 trln.
Shadow banking in China is dominated by lending to higher-risk borrowers, such as local governments, property developers, and SMEs. It is ultimately funded through retail bank
deposits, banks wealth-management products, and private
equity. Thus, the real issue in China is not the volume of shadow credit, but its quality, and the banking systems capacity to
absorb potential losses.
Market forces and policy conflicts triggered shadow bankings emergence in China. With the Peoples Bank of China
(PBOC) keeping interest rates artificially low, retail depositors
began taking advantage of higher rates of return offered by local
governments, property developers, and SMEs, which needed
funding to maintain investment and adjust to a new market
environment.
Since 2008, shadow banking has exploded, owing to price
and regulatory factors. In an environment dominated by direct
quantitative controls, such as increasingly stringent lending
quotas, shadow banking is meeting genuine market demand,
with the interest rates that borrowers are willing to pay providing a useful price-discovery mechanism. China simply needs a

better system for evaluating the quality of such credits (and for
providing depositors with returns that can offset inflation).
Chinese policymakers should view the shadow-banking
scare as a market-driven opportunity to transform the banking
system into an efficient, balanced, inclusive, and productive
engine of growth. They should begin by reforming the property-rights regime to enable market forces to balance the supply
and demand of savings and investments in a manner that
maintains credit discipline and transparency.
This requires, first and foremost, determining who the
investor or the bank bears the underlying default risk of high-

trln in total commercial-bank assets. Another 8 trln are housing mortgages, which also carry little risk, given low loan-tovalue ratios. Exposure to domestic sovereign obligations by
state-owned enterprises and local governments accounts for
about 32 trln, and obligations by private firms amount to
roughly 24 trln.
This breakdown suggests that the 8 trln cushion would be
sufficient to offset potential losses arising from higher-risk
credit in Chinas commercial banking sector. The high interestrate margins set by the PBOC provide additional support.
But, if more risk builds up through continued expansion of
shadow credit, this risk buffer may become inadequate.
Thus, Chinese policymakers must focus on curbing the
shadow-banking sectors growth, while ensuring that all
current and future risks stemming from the system are
laid bare. The introduction of measures to cool the property market, and new direct regulatory controls over
shadow-banking credit, represent a step in the right
direction.
Perhaps the biggest challenges facing China are raising real returns on financial liabilities (deposits and
wealth-management products) and promoting more balanced
lending. Increased costs for investment in real assets would
help to rein in property prices and reduce over-capacity in infrastructure and manufacturing.
Ultimately, addressing shadow banking in China will require
mechanisms that clearly define, allocate, and adjudicate financial risks among the key players. This includes ensuring that
borrowers are accountable and that their liabilities are transparent; deleveraging municipal debt through asset sales and more
transparent financing; and shifting the burden of resolving
property-rights disputes from regulators to arbitrators and,
eventually, to the judiciary. Such institutional reforms would
go a long way toward eliminating default (or bailout) risk and
creating a market-oriented financial system of balanced incentives that supports growth and innovation.

By Andrew Sheng
and Geng Xiao
yield wealth-management products. Given that this is a legal
question of contract definition and enforcement, it should be
answered in the courts or arbitration tribunals, not by regulators. Clarifying ultimate responsibility for credit quality and risk
would also reduce intermediation costs by eliminating the need
to resort to informal channels, such as credit-guarantee and
trust companies.
Furthermore, reducing local-government financing vehicles exposures is essential. China needs to build its municipal
bond market to generate more sustainable funding for infrastructure projects. Local governments could then privatize the
massive assets that they have accumulated during years of
rapid growth, using the proceeds to pay down their debt.
Reform efforts should be supported by measures such as
strict enforcement of balance-sheet transparency requirements
to improve risk management. In fact, the existing shadowbanking risks are manageable, given relatively robust GDP
growth and strong macroeconomic fundamentals. At the end
of 2012, Chinas commercial banks held 6.4 trln in core capital and 1.5 trln in non-performing-loan provisions, for a risk
cushion of roughly 8 trln.
Low-risk central-government bonds and central-bank
reserve requirements most of which are backed by substantial foreign-exchange reserves account for 31 trln of the 95

Andrew Sheng, President of the Fung Global Institute,

is a former chairman of the Hong Kong Securities and Futures
Commission, and is currently an adjunct professor
at Tsinghua University in Beijing. Xiao Geng is Director
of Research at the Fung Global Institute.
Project Syndicate, 2013.
www.project-syndicate.org

Cartographys new Golden Age

MOUNTAIN VIEW, CALIFORNIA No Diakubama, an
emigrant from the Democratic Republic of Congo who now
lives in Paris, is one of this centurys intrepid pioneers. Using
online mapmaking tools, he created the first map of his village, Mbandaka, which he and his wife have modified more
than 100,000 times since 2009. No literally put Mbandaka
and the people who live there on the map.
No is not the only such pioneer. There is a vast and growing community of online mapmakers creating useful, accessible maps of lesser-known areas and transforming peoples
lives in the process.
During the Age of Exploration, which extended from the
fifteenth to the seventeenth century, adventurers like
Christopher Columbus, Ferdinand Magellan, and James Cook
embarked on dangerous journeys to distant lands, from New
Zealand to Newfoundland, drawing detailed charts of their
voyages. By advancing geographic knowledge, they broadened peoples worldview, enhanced trade, and helped to
usher in the Industrial Revolution.
Today, people like No are spearheading a second golden
age of cartography, which promises to bring equally significant economic and social benefits. Indeed, accurate maps
break down geographic barriers, empowering individuals to
reach their desired destinations, enabling businesses to reach
consumers anywhere, and enriching peoples outlooks.
The Internet is transforming the way maps are made,
enabling ordinary people dubbed citizen cartographers
to work alongside intrepid adventurers and professional
geographers. These cartographers whose only common
characteristic is Internet access are embracing the opportunity to depict the places that they know and love, whether to
help their neighbors get around or to give faraway people a
glimpse of their local environments.
Using online tools like Google Map Maker, they are con-

tributing to the shared goal of building a digital map of the

world. Some even host mapping parties, at which communities gather around computers, in schoolyards or church
halls, to add layers of detail that extend beyond topography.
By including human elements, such as popular cafs or local
walking trails, they create comprehensive, useful tools for
others, and enhance their understanding of their own community.

By Brian McClendon

Digital maps can be as dynamic as the communities that

they depict. While paper maps can accurately portray static
features like rivers and mountains, they cannot easily be
updated when new buildings are constructed, roads are
rerouted, or new restaurants open. By contrast, digital maps
can be modified instantly, keeping locals apprised of developments in their area and helping visitors to feel like natives in
unfamiliar places.
Similarly, a digital map can be tailored to an individuals
interests or needs. A keen cyclist might want a map showing
bicycle paths, including information about the terrain. But a
tourist might prefer a map that highlights specific attractions or indicates public-transport links. Such customization leads to many millions of versions of the world all of
them accurate.
Digital mapping technology is having the most profound

impact on the worlds most remote and undeveloped regions.

In Africa, for example, road coverage on Google Maps
increased from 20% in 2008 to 75% last year, while the number of towns and villages for which detailed maps are available grew by more than 1,000%. This has not only facilitated
trade and transport, but also translates into faster response
times for emergency services, saving thousands of lives each
year.
In fact, modern tools like maps and satellite navigation
contribute to annual savings of up to 3.5 billion liters of gasoline and more than one billion hours of travel time. As a
result, farmers are better able to get their goods to market
before they perish, and to build more efficient irrigation systems, which save the global agricultural industry $8-22 billion annually.
The mapping movements growing momentum promises
to result in the accurate and comprehensive representation
of almost every inch of the world, including road data, photos, and business listings. This will create even more opportunities for economic growth, improve access to health care
and other services, contribute to social development, and
broaden both figuratively and literally peoples worldview.
To advance the worlds geographic knowledge, explorers
used to have to head out to sea, enduring inclement weather
and debilitating disease, unsure of where they were going
or whether they would ever return home. While todays
online cartographers do not face the same risks, they, too, are
embarking on a journey into the unknown in search of
knowledge, excitement, and better lives.
Brian McClendon is Vice President for Engineering at Google.
Project Syndicate, 2013.
www.project-syndicate.org

April 24 - 30, 2013

financialmirror.com | COMMENT | 9

Central banks outdated independence

BUENOS AIRES The global financial crisis has raised fundamental questions regarding central banks mandates. Over the
past few decades, most central banks have focused on price stability as their single and overriding objective. This focus supported
the ascendancy of inflation-targeting as the favored monetary
policy framework and, in turn, led to operational independence for
central banks. The policy was a success: the discipline imposed by
strict and rigorous concentration on a sole objective enabled policymakers to control and then conquer inflation.
But, as a consequence of this narrow approach, policymakers
disregarded the formation of asset- and commodity-price bubbles,
and overlooked the resulting banking-sector instability. This, by
itself, calls for a review of the overall efficacy of inflation-targeting.
Moreover, after the financial crisis erupted, central banks were
increasingly compelled to depart from inflation targeting, and to
implement myriad unconventional monetary policies in order to
ameliorate the consequences of the crash and facilitate economic
recovery.
With advanced economies struggling to avoid financial collapse, escape recession, reduce unemployment, and restore
growth, central banks are being called upon to address, sometimes
simultaneously, growing imbalances. This has triggered a search
for a radical redefinition of central banks objectives and has cast
doubt on the appropriateness of maintaining their independence.
In particular, central banks behavior during the crisis has
called into question whether inflation-targeting is an effective
framework in the presence of systemic shocks, and, more broadly,
whether it can be sustained throughout economic cycles. After all,
a policy regime that sets aside its only goal during a crisis seems
to lack the ability to cope with unexpected challenges. Critics identify this crisis straitjacket syndrome as the main problem with
single-minded inflation targeting.
While theoretical arguments can be made to justify recent
departures from policy, the reality is that in the post-crisis world,
advanced-country central banks goals are no longer limited to
price stability. In the United States, the Federal Reserve has essentially adopted a quantitative employment target, with nominal

GDP targets and other variations under discussion in other countries. And financial stability is again a central-bank responsibility,
including for the more conservative European Central Bank.
This shift toward multiple policy objectives inevitably reduces
central-bank independence. Some analysts have recently claimed

By Mario I. Blejer
that this is because the pursuit of GDP growth, job creation, and
financial stability, as well as the establishment of priorities when
there are tradeoffs, clearly requires political decisions, which
should not be made by unelected officials alone. Moreover, by
pushing interest rates toward zero, the current policy of quantitative easing (increasing money supply by buying government securities) has strong, often regressive, income effects. Opponents of
central-bank independence contend that, given the allocational
and distributional consequences of current monetary-policy interventions, central banks decision-making should be subject to
political control.
But this argument neglects an important point. While it is true
that multiple policy targets tend to increase the political sensitivity
of central banks decisions, concentrating only on price stability
also has important distributional consequences and political implications. In fact, politicization is a matter of scale, not a substantive
transformation of monetary policymaking.
The real reason why central-bank independence tends to create
a democratic deficit under a multi-target monetary-policy regime,
and why it has become increasingly vulnerable, is that the two
main arguments in favor of it no longer apply.
The first argument in favor of central-bank independence is
that, without it, politicians can exploit expansionary monetary policys positive short-run effects at election time, without regard for

its long-run inflationary consequences. (By contrast, fiscal and

exchange-rate policies rarely imply comparable temporal tradeoffs, and thus are difficult to exploit for political gain.) But this
argument becomes irrelevant when ensuring price stability is no
longer monetary policymakers sole task.
The second argument for institutional independence is that
central banks have a clear comparative advantage in dealing with
monetary issues, and can therefore be trusted to pursue their targets independently. But this advantage does not extend to other
policy areas.
Given that central banks are likely to continue to pursue multiple objectives for a long time, their independence will continue
to erode. As long as governments do not encroach excessively on
central-bank decision-making, this development will restore balance in policymaking and support policy coordination, particularly in times of stress.
To ensure a positive outcome, policymakers should develop a
fully transparent framework with well-defined rules of engagement. A strict framework for allowing, and at the same time limiting, governments involvement in central-bank decision-making
is particularly crucial in emerging markets, given that, in most of
them, central-bank independence has contributed not only to the
eradication of inflation, but also to institution-building.
Central-bank independence is a peculiar institutional innovation. Seemingly irrefutable theoretical models underlie a paradigm
that has changed in significant ways, and that, if preserved, is
bound to cause serious political problems. Like it or not, policymakers must accept that central-bank independence will continue
to weaken, and they should prepare to cope with the consequences.
Mario I. Blejer is a former governor of the Central Bank
of Argentina and former Director of the Center
for Central Banking Studies at the Bank of England.
Project Syndicate, 2013.
www.project-syndicate.org

April 24 - 30, 2013

10 | COMMENT | financialmirror.com

Eurozone backwater Slovenia is latest liability

l Trying

to avoid bailout, investors seek signs of reform; Transformation from communism half
finished as govt faces resistance to austerity, privatisations

Igor Luksic, leader of the Social Democrats in Slovenias

ruling coalition, disagrees with the European leaders who say
his country should privatise its three biggest lenders to avoid
the misery of another bailout in the euro zone.
We have always been against selling banks, said Luksic,
whose party is the second largest in Prime Minister Alenka
Bratuseks government.
The banks in the Alpine former Yugoslav republic of 2 mln
people are a key reason why it showed up on the agenda of
the recent Dublin meeting of the blocs 27 finance ministers
on preventing a new eurozone debt crisis.
Slovenia is facing serious challenges, EU Economic and
Monetary Affairs Commissioner Olli Rehn told Reuters, calling for decisive action to restructure and recapitalise the
banking sector among other urgent measures.
Financial market pressure on Slovenia has lain bare how
this tiny euro zone state achieved Europes smoothest transformation from a Communist economy to a market-based
model: it only went half way.
While former Soviet satellite states like Poland and the
Czech republic privatised big firms, slashed budgets, and
pushed through other reforms, Slovenia held on to public
assets, avoided cost cuts and repeatedly bailed out state
banks after escaping the violent breakup non-aligned
Yugoslavia in 1992.
That has now become a liability for Bratusek who, after
last months chaotic rescue of Cyprus, is scrambling to stop
a spike in Slovenias borrowing costs and convince investors
it can change its ways and avoid insolvency.
Bratusek, who took power only four weeks ago, has
pledged to break taboo by imposing unpopular austerity

measures and selling at least one of the publicly owned companies that make up as much as half of the economy, and
possibly a bank.
Luksic stopped short of threatening to quit the coalition if
it privatised the banks, but the cabinet has not rejected its
predecessors plan for Ljubljana to keep blocking stakes in the
main two ones, which experts say will prevent their sale.
The coalition of parties whose members range from neoliberal centrists to leftists, is not united on other reforms
either, and may face staunch opposition from voters.

WAVERING FAME

From its immaculate highways to the trendy shops and

bars in its capital Ljubljana, Slovenia resembles developed EU
states like Austria and Germany far more than its exCommunist peers.
With living standards measured at 84% of the EU average,
it has leapfrogged euro zone laggards Portugal and Greece
and enjoys more than twice the standard of Serbia, from
which it split when it left the former Yugoslavia in 1991.
But, following a nasty downturn and spike in the budget
deficit, its once enviable debt levels have doubled to 54% of
GDP.
Last week the Paris-based OECD warned the debt level,
fuelled by the cost of saving Slovenias banks plus healthcare,
pension, and other costs, could reach 100% by 2015 if
Ljubljana does not embrace reform.
Luksic acknowledged his party might not prevail in its
attempt to stop the banks being privatised but said at the very
least the biggest bank Nova Ljubljanska Banka or NLB,
should stay in state hands, since it could become a big

regional bank.
Foreign institutions have for years criticised successive
governments for stifling competition and investment and
say it has avoided painful reforms that its regional peers
embraced.
Spending by the state is about 50% of GDP, one of the
highest levels of the OECD club of wealthy countries.
Governments have also repeatedly rejected foreign bids to
buy state-owned firms, most recently killing the sale of leading grocery chain Mercator to a Croatian rival in 2011.
Protecting national interests, diplomats, business leaders,
and others say, is also tangled with corruption and cronyism
in Slovenias small ruling elite and will be a hard habit to
break.
The combination of state ownership, a tight-knit political
network, and bad management helped trigger the lending
spree from state banks that, following a collapse in real estate
prices, has gone sour.
Bratusek plans to shift some of the 7 bln euros in bad
loans choking mostly the banks NLB, Abanka Vipa, and Nova
KBM, in which the state is either the majority or a strategic
stakeholder, to a bad bank in June.
The government must then pump some 1 bln euros of
new capital into them this year - the OECD says maybe much
more - with the aim of selling them, even though bankers,
analysts and diplomats say there are no prospective buyers
for now.
It is not the first time the government has had to bail out
its banks. It has injected capital into NBL - which needs an
estimated 375 mln euros this time around - on five separate
occasions.

Italy deadlock nears end, problems not over

l Broad

based government within a week as Berlusconi comes out a big winner,

Bersani a broken man, leaving centre-left in turmoil
ANALYSIS

Months of paralysing political deadlock seem close to an end

in Italy with a new government possible within the week, but
there are still questions over whether the stability can last.
President Giorgio Napolitano has reluctantly been re-elected
for an unprecedented second term after traditional politicians
begged him to stay on and deal with one of the most turbulent
moments in recent Italian political history.
Now there is some optimism that a government can be
formed within the week, nearly two months after Februarys
inconclusive election.

NEW GOVERNMENT

Napolitano, 87, has emerged from the turmoil with his power greatly enhanced compared to the previous few months, when as
an outgoing president his arms were constitutionally tied.
Now he not only has the big stick of
being able to call a snap election, which
many politicians want to avoid, but is
thought to have obtained solid assurances of
cooperation from party leaders who begged
him to stay on.
Napolitano is expected to hold a rapid
round of consultations with political parties,
banging their heads together and then handing
a mandate to a potential new prime minister as
soon as Wednesday.
This prime minister-designate would try to form a broad
based coalition between the divided centre-left and Silvio
Berlusconis centre-right plus the centrists of outgoing Prime
Minister Mario Monti within the week.
Beppe Grillos populist 5-Star Movement bitterly opposes the
deal that re-elected Napolitano and would remain in opposition,
joined by the leftist SEL party of Puglia governor Nichi Vendola.
Napolitanos favourite to lead this government is said to be
veteran politician Giuliano Amato, a 75-year-old former pre-

mier with the experience and skills to face the political chaos.
However, after the election in February showed an overwhelming desire for change, Amato may be seen as too old and
too much a member of the traditional establishment. One alternative is Enrico Letta, the 46-year-old outgoing deputy leader
of the divided centre-left Democratic Party (PD).
However the PD splits may torpedo Letta, leaving
Napolitano to choose a less established political figure.
Whoever is given the mandate is expected to try to form a
government by the end of the week with ministries mixed
between senior politicians and a few technocrats.
They could include members of Montis government or of
the two commissions of sages that Napolitano set
up last month to propose reforms to mend the broken political system and address a chronic recession that has incited serious public anger.
Estimates of the life of the new government vary between one and two years - if
it survives at all. A common prediction is
that a new election could be held in June
2014, coinciding with European polls
and saving money for Italy, which has
one of the worlds biggest public debts.
High among the governments priorities
would be policies to restore growth to a
chronically stagnant economy, stimulate
employment and reform a dysfunctional electoral law which is one of the main reasons for
the long deadlock since February.

PROBLEMS

Although this outcome is widely predicted, the new mood

has not eliminated several elements of potential instability.
Chief among these is the explosion inside the Democratic
Party whose leader Pier Luigi Bersani has resigned and is said
to be a broken man after party rebels torpedoed two presidential candidates he had ordered them to vote for last week.
There is now open factional warfare inside the party which
could make it difficult to forge a reliable deal on a government
or avoid parliamentary sniping against the new administration.

The leftwing of the party opposes any coalition with media

magnate Berlusconi, who faces a string of scandals, and divisions over this were at the centre of Bersanis difficulties.
If a section of the party objects to a government deal, it
could split off and join Vendola in a new leftwing grouping
which might ally with Grillos populists.
But another danger is that Berlusconi, with his enemies in
total disarray, could decide to exploit his advantage and go back
to the polls within months if he doesnt get what he wants in
the new government.

WINNERS AND LOSERS

By far the biggest loser is Bersani, an amiable but colourless

politician whose string of errors have destroyed his career and
brought his party to the brink of collapse.
The biggest winner looks like Berlusconi, who is now riding
high, having overtaken the centre-left at the top of the opinion
polls and projecting an image of statesmanlike restraint as
Bersanis party falls apart. He has been calling for a broad based
grand coalition for weeks.
It is an extraordinary reversal of fortunes from as recently as
last November when Berlusconi looked a beaten man, his
People of Freedom (PDL) party was fracturing, and Bersani had
a 10-point lead in opinion polls.
But Berlusconi, 76, has long been acknowledged as one of
Italys most skilful politicians, with enviable communication
skills complemented by his television empire. Bersani has
proved to be one of the worst.
Another big winner looks like being Matteo Renzi, the 38year-old mayor of Florence, an outspoken opponent of Bersani
and who, in contrast, is a dynamic and effective politician.
However, Renzi needs time to set him up as the centre-left
candidate in the next election and he said on Monday there
should be no vote for a year.
Renzi has long been seen as a game changer in Italy with the
skills to defeat Grillos rabble rousing tactics - unlike Bersani and also attract a big chunk of centre-right voters. But it
remains to be seen whether a centre-left robbed of its left wing,
which opposes Renzi, would be strong enough to defeat
Berlusconi and Grillo in a new election.

EBOMAIAIA OIKONOMIKH EHMEPIA

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April 24 - 30, 2013

20 | WORLD MARKETS | financialmirror.com

Emerging ASEAN economies

By Oren Laurent
President, Banc De Binary

Investing in emerging markets is typically

associated with political and economic risk.
However, while the Western World continues
to struggle in the aftermath of recession, trading the Asian emerging markets is no longer
necessarily more risky, and in some cases, is in
fact more profitable. Its time to turn your
heads and savings to Indonesia, Malaysia and
Thailand. Heres why.
A survey of business leaders released by the
Economist Network at the start of the year,
entitled the 2013 Asia Business Outlook,
names these three countries among the five
most popular investment destinations in Asia
after the big regional superpowers, China and
India. An impressive 40% of firms surveyed
plan to increase their investment in Malaysia
and Thailand during the year, and Indonesia
remains attractive to multinationals. As members of Asean (the Association of Southeast
Asian Nations), these dynamic economies certainly look set to grow. They deserve to be seen
as powers in their own right, and have a valuable role to play in contributing to Asias overall economic success and development.
Unlike their Western counterparts, Asean
governments have not borrowed excessively

and therefore have more scope to use monetary policy to stimulate growth where appropriate. According to Sherene Ban, Asian equities specialist at JPMorgan, the region was hit
badly by the Asian crisis of 1997 and was determined not to repeat the experience. Having
spent a decade rebuilding and investing in
good infrastructures, it is now reaping the
rewards.
The comparatively little debt in these countries will also support an increase in consumer
spending as credit grows. Indeed, the affluent
middle-class in the Asean region is expected to
increase. This segment, defined as those with
disposable income above $3,000 a year, is likely to make up a quarter of the population by
2015, providing a significant boost to various
sectors from healthcare to retail.
The countries are also profiting from
Chinas continuing economic surge, which
has resulted in demand for their commodities
and exports. An Ernst and Young report in
February indicated that China will pick up
8.3% in 2013, with obvious advantages to its
key trading partners which include Malaysia,
Indonesia and Thailand. These three are also
working strategically together to profit from
their shared commodities. Just last week for
example, Indonesia proposed a review of the
supply management for rubber, following an
agreement in August by the countries, who
make up 70% of the worlds rubber output, to
control supply and raise prices.
Statistics from the International Monetary
Fund seem to support my case for investment.

The IMF expects Malaysia to grow 4.7%,

Indonesia to grow 6.3% and Thailand to grow
7.5% by the end of the year. It is important to
stress to potential investors that emerging
economies can be volatile and unpredictable.
Such great growth figures are not going to be
sustainable indefinitely, and I wouldnt bet my
own money at this stage on what will happen
in the longer-term. Yet, the signs for 2013 at
least are positive.
Factor in too that Europe and America are
struggling, and remain unattractive to many
investors. By comparison, the Asean region
looks like an even more booming and sensible

alternative. A great place to start investing

would be through Exchange Traded Funds,
and for online traders, consider binary options
due to their short-term availability with
expiries over the coming months.

www.bbinary.com

Yen pushes higher, Aussie falls on China concerns

The yen rose broadly and the Australian
dollar hit a six-week low on Tuesday as a
weak reading on the Chinese manufacturing sector stirred worries about the health
of the global economy.
The Australian dollar touched a low of
$1.0222, its lowest level since March 11,
and last changed hands at $1.0224, down
0.4% from late U.S. trade.
Growth in Chinas vast factory sector
dipped in April as new export orders
shrank, according to the flash HSBC
Purchasing Managers Index a preliminary survey of factory managers, suggesting the worlds No.2 economy still faces
formidable global headwinds into the second quarter.
The gauge of manufacturing in China,

Australias biggest export market, triggered

a renewed fall in the Aussie dollar, which
only last week had suffered its biggest
weekly percentage drop in nearly a year, hit
by concerns about Chinese growth and a
rout in commodity prices.

In addition, Japanese names and some

short-term traders were spotted selling
cross/yen pairs on Tuesday morning,
Halley said.
The dollar had made an attempt to break
above the psychologically key 100 yen level

FOREX COMMENTARY & TECHNICAL ANALYSIS

The yen rose broadly, with the U.S. dollar falling 0.6% to about 98.68 yen. The dollars drop versus the yen gained momentum after triggering some stop-loss dollar
offers, Jeffrey Halley, FX trader for Saxo
Capital Markets in Singapore told Reuters.

on Monday after G20 countries gave a

stamp of approval to Japans massive monetary easing program, which sent the yen
reeling to a four-year low of 99.95 versus
the dollar earlier this month.

Although the dollars latest attempt to

break above 100 yen failed, the greenback is
seen likely to attract buying against the yen
on dips.
Personally feel that any dips in dollar/yen and the related crosses will be
bought into, said a trader for a Japanese
bank in Singapore. There is no indication, at least at my end, of any significant move to buy the yen, except on
profit-taking, the trader added.
Against the dollar, the euro sagged
0.2% to $1.3040, still stuck in a range of
$1.30 to $1.32 for now.
Keeping a lid on the euro were comments from European Central Bank policymakers that suggested the bank may be
leaning towards a cut in interest rates.

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 24 - 30, 2013

financialmirror.com | MARKETS | 21

Chinas local debt fears return

Marcuards Market update
by GaveKal Research
The surprising re-acceleration of credit
growth in Chinatotal credit grew at a 22%
pace in the first quarter, against just a 9.6% rise
in nominal GDPis drawing attention again to
the role of local governments. Growth-obsessed
local agencies have been turning in large numbers to the dodgy shadow finance markets to
borrow money for new infrastructure projects.
With this borrowing coming so soon after the
2009 splurge on debt-funded infrastructure,
even Chinese investors are getting dubious
about buying more local government debt.
Yesterday, Chinas State Council held its quarterly meeting on economic policy and flagged the
need to guard against the risks of local government debt.
How big is the problem? We estimate total
local government debt in China, including both
their direct debt and the indirect debt of local
financing vehicles, is around Rmb16-18trln, or

30-35% of GDP. This debt burden increased by

about Rmb2trn in 2012, so local governments
clearly had to do some additional leveraging-up
to pay for last years round of infrastructure
spending.
While the latest surge in local government
debt is hardly a good thing, it has always been
difficult for us to see this kind of debt as a trigger
of financial crisis. All local government debt is
ultimately a liability of the sovereign, since in
China local governments have no legal or constitutional basis for taking on independent financial liabilities. Local agencies are obviously doing
so anyway and so there will have to be a reckoning. But this will be a political negotiation rather
than a market-driven crisis, since all the money
being lent to them is coming from other parts of
the sovereigni.e., the state-owned commercial
and development banks. Ultimately it is just a
matter of different parts of the government coming to terms with each other.
The concerns on Chinas local government
debt are really about transparency, since no one
knows exactly how much there is; and certainty,
since no one knows on what terms the central

has played a much smaller role in driving Chinas

business cycle than most popular accounts suggest; the property market is much bigger and
more important. Since the latest wave of infrastructure projects will likely generate lower
returns than previous ones, and public infrastructure projects by their nature already have low
returns, it is hard to see this spending generating
a lot of value-added for the economy. So while
cutting back on the credit that finances local government infrastructure spending would be a
shock, it is unlikely to result in a massive longterm hit to Chinas growthsince that money is
not contributing much to growth as it is.
The alternative is for the state to give overleveraged local borrowers license to keep borrowing despite the obvious excesses, in a (misguided) attempt to keep growth stable. We saw a similar phenomenon in Japan in the 1980s and in
Korea in the 1990s, though those borrowers
were state-supported companies rather than
local governments. Growth managed to stay
high for several years even though the problem
of excessive debt had been clearly identified. But
the side effects of the continued surge in credit
were asset bubbles and a loss of competitiveness.
The risk is that China could end up going down
this paththough the pro-reform rhetoric of the
new leadership for now suggests they want a different strategy.

government will eventually take over the local

debt. Given the modest scale of formal central
government liabilities, Beijing could easily
absorb the full face value of local government
debts. But it will not have to, since local government debts are generally liabilities that are
backed by a physical asset, usually an infrastructure project.
The government is only on the hook for the
difference between the cash flow generated by
that asset and the value of the loan.
The real issue for Chinas over-leveraged local
government borrowers, like all over-leveraged
borrowers, is that someday they have to stop
borrowing. And that therefore the spending
financed by that borrowing will also stop.
Chinese banks are doing as little lending to local
government agents as they can get away with
politically, and face intense regulatory scrutiny
on these loans already; there has been less attention to their purchases of bonds issued by these
entities (banks buy most corporate bonds in
China) but this channel of fundraising is also
getting tighter.
Our view is that infrastructure pump-priming

The social purpose of tax havens

The Cahuzac affair in France has conveniently emerged just as the
search for possible scapegoats to Europes quandary was intensifying.
Thanks to the former French budget ministers secret Swiss bank
account, Europe can now move from its war against finance (Hollande
declaring that finance was his enemy, the financial transaction tax, capping of bonuses, etc) to an outright war against tax havens (letting
Cyprus sink, arm-twisting Luxembourg into abandoning its bankingsecret policy, etc). Leaving aside the EUs increasing penchant for forcing members to adopt policies that blatantly go against national interests
(like the Tobin tax in the UK), yesterdays announcement by
Luxembourg of an open-book policy raises the question of whether the
EU is cutting off its nose to spite its face. If tax havens have existed and
thrived for so long, they must have some sort of economic justification.
Beyond the debate on the morality of hiding ones wealth, let us
simply focus on the possible consequences of closing down havens. First
assume that there are two kinds of deposits in these jurisdictions: the
perfectly legal kind, and the illegal kind (such as the ones that Jerome
Cahuzac had in Switzerland). For an economist, there is no reason to differentiate between the two. Combine them and the amounts get large.
Large enough to offer both types of investors economies of scale, a large
array of financial services needed, etc.
Now the reality for most tax havens is that their economies are far too
small to absorb the excess savings that pour into their countries. Their
banks thus end up being large buyers of assets outside of the country. All
else being equal, this should be good news for foreign assets. If, for
example, a Luxembourg bank decides to buy French or German bonds
with the deposits of a Belgian dentist, then the yields in Germany and
France will be lower than they would have otherwise been. If that
account is now closed and moved to Singapore to buy SGD bonds (probably a smart trade anyway), then interest rates in France and Germany
will move higher, while they fall in Singapore.
Or to put it another way: when it comes to the illegal deposits, the

www.marcuardheritage.com

WORLD CURRENCIES PER US DOLLAR

CURRENCY

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
1.5219
1.5059
20.001
5.7405
12.05
1.2985
1.653
231.26
0.5386
2.6588
0.3306
12.2638
5.9067
3.178
3.3538
31.7575
6.6113
0.9395
8.133

AUD
CAD
HKD
INR
JPY
KRW
NZD
SGD

1.0228
1.0283
7.7644
54.41
98.64
1120.65
1.1948
1.2405

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

0.3770
6.9171
12061.90
3.6244
0.7057
0.2851
1512.50
0.3842
3.6407
3.7501
9.2877
3.6729

AZN
KZT
TRY

0.7836
151.08
1.8075

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.

ASIA
Azerbaijanian Manat
Kazakhstan Tenge
Turkish Lira
Note:

* USD per National Currency

The Financial Markets

Weekly Economic Calendar

Date
Country
Detail
APR 24
EUR German ifo Business Climate due 11.00am
APR 24
GBP BBA Mortgage Approvals due 11.30am
APR 24
EUR Italy 10-year bond auction
APR 24
US
Durable Goods Orders due 3.30pm
APR 24
US
Core Durable Goods Orders due 3.30pm
APR 25
EUR Spanish Unemployment Rate due 10.00am
APR 25
GBP Prelim GDP growth Q/Q due 11.30am
APR 25
US
Weekly Unemployment Claims due 3.30pm
APR 26
JPN Bank of Japan Monetary Policy Statement, Press Conf
APR 26
CHF Swiss KOF Economic Barometre due 10.00am
APR 26
EUR M3 Money Supply and Private Loans due 11.00am
APR 26
US Advance GDP growth Q/Q due 3.30pm
APR 26
US
Advance GDP Price Index Q/Q due 3.30pm
APR 26
US
Revised UoM Consumer Sentiment due 4.55pm
Indicated times are Cyprus time

economic net effect of Mr Cahuzac hiding his money in Switzerland was

for this gentleman to have a lower tax rate. If the governments of the
world now succeed in getting these deposits in the open, it will be equivalent to a tax increase, no more no less. And increasing taxes massively,
when tax rates are already unbelievably high, would be a sure recipe for
sending the struggling economies into a tailspin. Look at it this way:
with their domestic economies already circling the drain, can the
French, Italian or Spanish entrepreneurs stomach a tax increase? Once
again, a war on tax havens is (at least for an economist without any
moral compass) nothing but an attempt to increase taxes to prop up
bankrupt welfare states; i.e., yet another attempt to send good money
after bad to continue feeding the leviathan.
As the 19th century Frederic Bastiat used to say, in any economy, you
have what you see and what you do not see. In this case, we see the evil
tax havens which allow corrupt French politicians to hide their wealth
from the confiscatory taxes they impose on the rest of the population.
What we do not see is that tax havens may be a key part of an age-old
equation which allows small, risk-taking entrepreneurs to produce profitably. Who is to say that, if we close the tax havens, a number of French,
German, Italian, etc, entrepreneurs will not simply decide to head to the
beach and call it a day?
So, at the risk of sounding like a Burkian conservative, we would have
hoped that Eurocrats would tread carefully when attempting to shift
social contracts and economic infrastructures for the already struggling
European entrepreneur. As things stand, Europes welfare states are
already on the brink. In this position of weakness, going out all guns
blazing after rich people and their wealth strikes us as sheer madness; or,
perhaps, simple desperation? With every day that passes, Europe continues to make itself less entrepreneur- and investor-friendly. European
banks rallied hard yesterday after their -22% post January dropany
such rallies should be sold, just as any dip in Singaporean banks should
be bought.

Interest Rates

Forecast Previous
106.4
106.7
31.2k
30.5k

Base Rates

LIBOR rates

CCY

-2.80%
0.50%
26.50%
0.10%
352k

5.60%
-0.70%
26.00%
-0.30%
352k

0.98
0.99
-0.80% -0.90%
3.00%
0.40%
1.40%
1.00%
74.3
72.3
Source: Eurivex

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
0.49
0.06
0.12
0.00

0.24
0.50
0.10
0.14
0.01

0.28
0.50
0.13
0.16
0.02

0.43
0.59
0.22
0.25
0.09

0.72
0.89
0.41
0.44
0.25

USD
GBP
EUR
JPY
CHF

0.35
0.54
0.36
0.23
0.02

0.45
0.60
0.45
0.25
0.09

0.62
0.70
0.57
0.28
0.20

0.83
0.85
0.72
0.33
0.33

1.29
1.23
1.04
0.46
0.61

1.82
1.76
1.46
0.69
0.98

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

Opening Rates

100
1 USD 1 EUR 1 GBP 1 CHF
JPY
1.2985
0.7701

1.5219

1.0644

1.0138

1.1720

0.8197

0.7807

0.6994

0.6661

0.6571

0.8532

0.9395

1.2199

1.4298

98.64

128.08

150.12

0.9525
104.99

Weekly movement of USD

CCY\Date

12.03

28.03

09.04

16.04

23.04

CCY

Today

USD
GBP
JPY
CHF

1.2977

1.2740

1.2996

1.3024

1.2994

0.8714

0.8416

0.8509

0.8510

0.8512

124.96

119.68

128.71

126.83

128.11

1.2287

1.2116

1.2106

1.2079

1.2129

GBP
EUR
JPY
CHF

1.5219
1.2985
98.64
0.9395

Last Week %Change

1.5308
1.3073
97.52
0.9297

+0.58
+0.67
+1.15
+1.05

April 24 - 30, 2013

22 | WORLD MARKETS | financialmirror.com

Commodities slump, investors selling

l

Consumers to gain slowly; Disinflation gives more leeway to central banks;

India, China among gainers; Australias luck may run out

Lower airfares, cheaper food and rising profit margins are

among the benefits that should flow from tumbling oil and
commodity prices - but only after a long lead time.
Having poured $400 bln into commodities over the past
decade, many investors are now selling. Their confidence that
risky assets could only float higher on a rising tide of cheap central bank money has crumbled as the global economy fails to
respond to the stimulus.
Even China, an important buyer of natural resources, is
slowing. Inflation, against which gold in particular is a classic
hedge, is falling nearly everywhere.
Price pressures will ease further if natural resources keep
falling. That is bad news for exporters such as Saudi Arabia and
Brazil but good news for net importers.
Weaker commodity prices should be positive for the world
economy on average because falling inflation supports consumer spending, said ABN AMRO economist Han de Jong.
Standard and Poors Goldman Sachs Commodity Index has
fallen 6.6% so far this year.
But raw materials represent a small part of most firms costs,
so it is not surprising that some businesses, especially those in
very competitive markets, are not getting carried away.
There are thousands of components in a car so the impact
might not be that great, said Cui Liyan with Great Wall Motor
Co, Chinas top maker of SUVs and pick-up trucks. Great Wall
has never passed on additional costs to consumers when commodity prices have surged in the past.
For a U.S. economy experiencing slow growth, cheaper
energy is a positive, said Michael Ward, chief executive of CSX
Corp, the countrys second-largest railroad. But CSX itself is
indifferent because it runs a fuel surcharge programme. Over
time, were passing the increases or decreases in fuel to the customer, Ward said.
An official at South Koreas largest food maker, CJ
CheilJedang Corp, said it normally takes four to six months
before a fall in agricultural futures prices passes through into
the firms product prices.

OIL THE ONE TO WATCH

The lurches in gold, including the sharpest one-day drop in

30 years on Monday, have grabbed the attention, but falling oil
prices are of much greater economic significance.
Brent crude is down about 16% from the years high at
$119.17, hit on February 8.
Economists at JP Morgan estimate a 15% drop in the price
of oil, caused by a supply increase, would be enough to lift global economic output this year by 0.2 percentage points.
But if the price fall reflects a darkening economic outlook,
the same 15% decline is consistent with a 0.5% downgrade in
global growth prospects for the year, the bank calculates.
An executive at Indian engineering company Larsen &
Toubro said the broader fall in commodity prices cut both ways.
Cheaper materials would help profit margins and, if the trend
were sustained, would increase the chances of lower interest
rates, he said. But prices were falling for a reason.

Prices are down today because the investment cycle has

slowed and demand for commodities has slowed. If this extends
over the long term, it cannot be a good thing for a projects
company such as ours, he said.

THE EXCHANGE RATE FACTOR

Pinpointing the repercussions of the commodity sell off is

further complicated because it cannot be seen in isolation.
KCE Electronics, a Thai maker of printed circuit boards,
should be sitting pretty because it uses a lot of copper, which is
down 12% so far in 2013.
But executive director Panja Senadisai said the savings are
outweighed by the strength of the Thai baht against the dollar,
which hurts KCEs exports.

By Alan Wheatley
Global Economics
Correspondent, Reuters
The story is similar at Tenneco Incs Indian subsidiary: the
auto components maker is seeing lower prices for steel and rubber - the key Tokyo Commodity Exchange rubber contract has
shed more than 8 percent this week - but a weak rupee and
high inflation are diluting the benefit.
Currencies also muddy the waters for Japan Airlines Co,
with a weakening yen on balance a negative for the airline, said
JAL spokesman Taro Namba. Still, JAL has already responded
by announcing a 7.6% cut in cargo fuel surcharges from May 1
to 122 yen per kilo on long-haul international routes. And
Korean Air Lines, South Koreas biggest airline, expects a drop
in fuel surcharges to lead to lower passenger ticket prices with
a one months lag.

PASSING ALONG THE FOOD CHAIN

Cheaper food is a particular boon in countries with uncomfortably high inflation. Take Indonesia, where inflation scaled a
nearly two-year high of 5.9% in March.
Thanks to falling prices for everything from rice to meat and
shallots, the month-on-month rise in consumer prices will
probably be less than 0.1% in April, according to deputy central
bank governor Perry Warjiyo.
Business models differ and not everyone is rushing to pass
on cheaper inputs. Danish shipping group A.P. Moller - Maersk
Group is an example.
Our job is to make sure that the customers understand that
they actually have a big value proposition by shipping with us...
The customers are willing to pay a bit more. This is not a commodity. Theres more to it than just shipping a box, said chief
executive Nils Anderson.
With global inflation by and large benign, the door is open
for leading central banks to provide even more monetary sti-

mulus. St. Louis Fed President James Bullard said he would

favour increasing the pace of the Federal Reserves bond buying
if inflation continues to go down. U.S. consumer prices rose
just 1.5% in the 12 months through March.
Falling commodity prices and slower wage growth give the
Bank of England more scope to resume bond-buying to try to
galvanise the economy, BOE policymaker Martin Weale argued.
Basic wage growth in Britain has slowed to a record low.
Even the conservative European Central Bank has hinted
that it is open to doing more. With the banks economists forecasting an inflation rate of just 1.3% in 2014, well short of its
target of just under 2%, more and more economists expect an
interest rate cut next month.
China too has increased policy room. The drop in global
commodity prices is obviously very good news for China,
because it will help lessen imported inflationary pressure and
leaves Beijing much more scope to expand credit and loosen
monetary policy to bolster the domestic economy, said Yuan
Gangming, a researcher at the Chinese Academy of Social
Sciences.

INDIA VS AUSTRALIA

India, Asias third-largest economy, is hoping that the commodity rout will not only dampen inflation but also reduce its
twin deficits. Crude and gold imports contribute nearly 45% of
Indias total import bill.
The fall will help us deal with the widening current account
deficit, which is the biggest worry for the government, said a
senior official at the ministry of finance in New Delhi.
India spent $169 bln on foreign oil in the fiscal year that
ended in March, 9% more than the year before. That is a big factor behind a full-year current account deficit likely to have been
around 5% of GDP - a level the central bank governor has called
unsustainable.
And because India heavily subsidises consumer fuels and
fertilizer, the governments budget deficit for the new fiscal year
could well come in below its target of 4.8% of GDP if global
commodity prices keep declining, the official added. The fall in
crude prices could halve the oil subsidy bill.
Australia would appear to be an obvious loser from an end
to the commodities super-cycle. The Lucky Country has
enjoyed more than 20 years of unbroken growth, largely thanks
to booming exports of minerals and energy to Asia.
Lower commodity prices and a strong Australian dollar have
already forced Treasurer Wayne Swan to slash his forecast for
tax revenues, especially from company earnings and a new
profits tax on big iron ore and copper mines. As a result the government has had to abandon its promise to return to a budget
surplus for the year ending in June. But Swan remains optimistic about growth prospects across Asia.
The growth in the middle classes across the Asian region
will produce demand for a whole range of goods and services,
not just in resources, not just in agriculture, but across a wide
range of activities and I think the consequence of that will only
be good for Australia, he said.

Solaise doubles assets, clients eye smaller hedge funds

A U.K.-based hedge fund set up by alumni from some of
the worlds biggest computer-driven traders of futures markets has almost doubled assets in recent months, as investors
in the sector look to smaller firms to help them ride out tough
market conditions.
Solaise Capital, set up in late 2010 by former employees of
Winton, Man Groups flagship AHL fund and Aspect Capital,
said that inflows from a pension fund client in December and
further inflows this year have lifted assets to around $165
mln.
That compares with the $86 mln it ran at the end of
November.
Meanwhile, Man Group has seen assets at its AHL computer-driven investment fund fall to $14.4 bln at the end of last
year from $21 bln a year before, while Winton Capital, one of
the worlds biggest funds, has also seen outflows.
In contrast, Cambridge-based Cantab Capital, run by Ewan
Kirk, has seen assets jump to $5.3 bln from $1.6 bln at the
end of 2011.

Solaises inflows come in spite of two years of performance

losses both for Solaise and for the wider group of so-called
CTAs (commodity trading advisors) in 2011 and 2012.
Such hedge funds trade a wide variety of global futures
markets, including commodities but also currency, bonds and
equity instruments, but have suffered as financial markets
lack the long-lasting trends they usually profit from.
Chief Operating Officer James Walker said that investors
had been attracted to Solaises trading systems and the fact it
uses a variety of strategies to trade markets.
We launched at probably the worst time you could launch
in a CTA in 20 years, said Walker, formerly chief financial
officer at Aspect Capital.
Everyone understands its been a truly dreadful run for
CTAs and they appreciate weve done pretty well. (But) clearly
we need to deliver absolute performance.
The average CTA lost 2.5% last year, according to Hedge
Fund Research, while Solaise was down 1.1%.
Many small managers in the $2.3 trln hedge fund industry

have struggled to attract clients since the credit crisis as

investors have often opted for the brand names and perceived
safety of multi-billion dollar firms.
But there are signs in the computer-driven sector that
investors are hunting out smaller funds that they believe have
strong teams and risk management. People are getting away
from the big names because theyre not getting the transparency, said Yvonne Barker-Layton, director at hedge fund
research firm Revere Capital Advisors.
Walker said Solaise, which is based in Londons plush St
Jamess Square, differed from rivals by having less of its
assets invested in the traditional strategy of following market
trends.
CTA performance has improved this year. Broker
Newedges CTA index is up 2.9% in the first three months of
the year, while Winton is up 7.5% so far this year.
Funds also profited from the recent slump in the price of
gold, which by itself added 1.09 percentage points to fund
performance, according a Newedge model portfolio.

April 24 - 30, 2013

financialmirror.com | WORLD MARKETS | 23

Osborne urges Scotland to stay in U.K.

Britains government raised the prospect of euro-style
financial problems if Scotland votes for independence, saying
the kind of currency union proposed by nationalists is unlikely to work.
The euro zones experience of countries sharing a currency but not a government shows no there is clear case for an
independent Scotland to use sterling, Britains finance ministry said in a report.
The nation of 5 mln will hold a referendum on September
18 next year to decide whether to split from the U.K., as proposed by the Scottish National Party (SNP) that runs the
countrys devolved government.
Independence campaigners want Scotland to keep sterling
initially and decide later whether to set up its own currency.
British finance minister George Osborne linked the push
by nationalists to the problems besetting the euro zone and
said an independent Scotland using the pound would have
no control over its currency and economic policy.
I think its unlikely that the rest of United Kingdom would

agree to or could make work a euro-style currency zone with

Scotland, he told BBC radio. If Scotland wants to keep the
pound, the best way they could do that would be to stay in
the United Kingdom.
Opinion polls show around 30% of Scots are currently in
favour of independence, while 50% are against.

PLAYING WITH FIRE

A leading member of the SNP accused the Treasury of trying to make the prospect of independence sound as difficult
as possible and said Osborne was playing with fire.
John Swinney, Scottish finance secretary, said an independent Scotland might refuse to take on its share of British
debt if London did not let Scotland use the pound as part of
a currency union.
Financial markets are unperturbed by what they see as a
remote prospect of Scottish independence. But there could
be major implications for sterling and the British govern-

ment bond market if this perception changed.

Markets could easily force a currency union to break up
after independence if they did not think there was a solid
commitment to it on both sides, imposing costs on both
Scotland and the rest of Britain, the report said.
Moreover, there would be complex issues to be decided
on whether the Bank of England could continue to be a
lender of last resort to Scottish banks, and Britain would
want rigorous oversight of an independent Scotlands fiscal policies.
The report highlighted further risks for Scotland if it
decided to use sterling unilaterally, join the euro or create its
own currency.
Scotlands economy was heavily exposed to the volatile oil
and gas sector, and more similar to the economy in the rest
of Britain than to that of the euro zone, the report said.
All of the alternative currency arrangements would be
likely to be less economically suitable for both Scotland and
the rest of the UK, it concluded.

MPs hope Carney will change BoE culture

Future Bank of England governor Mark Carney must not
lose sight of the need to revamp the central banks
hierarchical culture when he takes over on July 1, British
MPs said on Friday.
Members of the parliament committee that scrutinises the
BoE have had a spiky relationship with the current governor,
Mervyn King, who they accuse of a high-handed approach.
But when Carney appeared before the MPs in February, he
said he would seek consensus - something which the
committee welcomed in a formal report on Carneys
appointment.
If these commitments result in meaningful change to the
current hierarchical decision-making processes and culture
of the Bank, this will be a highly significant development,
the committee said on Friday.
However Carney will have his work cut out to avoid a
clash with other policymakers when he arrives at the bank.
Under a new remit from finance minister George Osborne,
the bank must decide by early August whether it plans to use

so-called intermediate targets to provide long-range policy

guidance.
In his current role as head of Canadas central bank,
Carney has championed committing to keep interest rates
low until a certain intermediate target, such as a level of
unemployment, is reached. But some BoE officials have deep
reservations about whether this would work in Britain.
At a Reuters event last week, Carney again praised this
approach, which is also taken by the U.S. Federal Reserve.
It helps market participants understand not exactly the
timing of adjustment of interest rates but the minimum
conditions before the Fed even thinks about adjustment of
interest rates, he said.
Carney will be taking over the bank at a time when there
is major uncertainty about the best course for monetary
policy at a time of economic stagnation and above-target
inflation, and when the bank has also just assumed major
new regulatory powers.
Legislators said they were worried that the arm of the BoE

responsible for supervising banks, the Prudential Regulation

Authority, would hurt competition in Britains already
concentrated banking market through over-regulation.

Banker steps into the role of superhero

In other ages, we have called on shamans or saints in times
of crisis when the usual remedies have not worked.
In the stagnant world economy today, we have designated
central bankers as our superheroes, and we are relying on their
magical monetary powers to restart global growth.
As the European Central Bank president, Mario Draghi,
whom some have nicknamed Super Mario, said this month:
There was a time, not too long ago, when central banking was
considered to be a rather boring and unexciting occupation.
Not anymore. No one embodies this new glamor more than
Mark Carney, the 48-year-old governor of the Bank of Canada,
who has been tapped to lead the Bank of England, making him
the first foreign governor in the institutions 319-year history.
The bar for Carney could not be higher. A cartoon in the
British papers made the point. It showed a Bethlehem inn with
Joseph leading Mary on a donkey. The caption above the
innkeepers head declares: Unless youre Mark Carney, youll
have to make do with the stable.
Carneys star power was reflected in the packed house that
turned out in Washington on Thursday to hear him at a
Thomson Reuters Newsmaker interview. Carney, who told
legislators he hoped his departure from Britain would be less
newsworthy than his arrival, continued his effort to play down
heroic expectations.
He deftly dodged questions about the British economy,
saying it was not his job to comment on Britain yet. And he
pointed out that fiscal policy - the domain of the elected
authorities - and the private sector were the true engines of
economic liftoff.
If we want to talk about ultimate sources of growth,
sustainable fiscal policy is a necessary condition. Sustainable
growth comes from the private sector, not from the (IMF), the
Bank of Canada or anyone else, he said.
He also took care to delineate the proper lines of authority

between the central bank and the Ministry of Finance, and

steadfastly declined repeated invitations to overstep them.
Central bankers take fiscal policy as given, Carney said.
Treasuries take monetary policy as given. Thats the
separation, and Im not going to wade in positively, negatively,
neutrally.
Within those constraints, though, Carney offered a
cautiously optimistic view of the world economy.

By Chrystia Freeland
Reuters Editor
The important development in our opinion over the course
of the last 12 months or so, is that the quality of private-sector
growth in the United States has picked up, he said. The U.S.
is moving towards that class of advanced economies that have
well-functioning financial systems where private credit is
growing and where there is reasonably solid investment
growth.
That is good news for Canada, as Carney said, and it is also
good news for the rest of the world.
Carney believes that a crucial element in restoring
sustainable global growth is finishing the job of repairing global
finance and the regulatory framework in which it operates. As
the head of the Financial Stability Board, set up by the Group
of 20 major economies in the aftermath of the financial crisis,
he is one of the leaders in that effort.
A major focus is repairing the gap that was revealed in the
emergency response to 2008 - the existence of too big to fail
banks, whose owners and executives pocket profits in the good

times but get a state bailout when things go awry. Over the next
few days in Washington, during the spring meetings of the IMF
and the World Bank, Carney and other central bankers and
finance ministers will continue to hammer out a way to let
banks die without requiring taxpayers to foot the bill.
The recent crisis in Cyprus gave a messy preview of how that
sort of resolution might work.
Carney hopes that global guidelines - and they need to be
simple enough, he said, to be usable in the time frame in which
the authorities in the real world must often operate - will make
future resolutions cleaner and more predictable.
That game plan, he believes, should include bail-ins, or
making stakeholders in the banks pay most of the costs.
Bail-in broadly speaking - not bail-in as it was performed a
couple of weeks ago in Cyprus - but bail-in as a component of
addressing systemic risk, Carney said, is an absolutely
necessary element. It doesnt solve everything, but its
absolutely necessary.
Having lost our faith in the private sector and the bankers
who dominated so many Western economies before 2008,
some are looking to government bankers like Carney.
One of the analytical mistakes before the financial crisis was
believing that efficient markets were perfect and that private
bankers could police themselves.
Refreshingly, Carney is not making the same error in
reverse. He is a believer in regulation and has embraced it at its
most complex, global scale. But he said regulators need to be
watchful of the unintended consequences of their rules and
mindful of the feedback loops between their actions and private
markets. The relationship between markets and governments is
a complicated process that requires eternal vigilance and
constant tweaks.
If the central bankers can pull that off, they will deserve that
room in the inn after all.

April 24 - 30, 2013

24 | WORLD MARKETS | financialmirror.com

Brazilian banks brace for weak earnings

l Investors

to eye trends in margins, revenue, defaults; Return on equity rose for Ita Unibanco;
Default ratio up for Santander Brasil

Brazils largest private-sector banks are braced for another

quarter of weak earnings as sagging economic growth continues
to drag on demand for new loans while preventing defaults from
falling more rapidly.
First-quarter data from the countrys top three listed nongovernment banks should reinforce the view that profitability
trends in the sector remain fragile, with performance hinging
excessively on cost-cutting as interest income slips, a Thomson
Reuters poll with analysts showed on Friday.
The business outlook for Ita Unibanco Holding SA, Banco
Bradesco SA and Banco Santander Brasil SA did not improve in
the quarter, analysts said. Central bank data on the credit market
pointed to disappointing loan book expansion, which likely
weighed on top-line performance. Overall, we think the quarter
is unlikely to be an inflection point signaling an acceleration of
earnings momentum, said Sal Martnez, a senior banking
analyst with JPMorgan Securities in New York.
Banks have suffered in the face of government pressure to
cut borrowing costs, a reluctance among indebted consumers to
borrow and two years of flagging activity. Last year, industry
profit fell for the first time in 15 years as banks had to focus on
less-risky types of credit that charge lower spreads the
difference between the interest rate charged on a bank loan and
the cost of funding.
Return on equity, a gauge of how well banks invest
shareholder money, rose only for Ita - suggesting that profit
gains stemmed from stringent expense reductions and a focus
on activities other than loans. Net interest margin, the average
rate earned on loans, fell for a sixth quarter, the poll found.
This years first quarter was probably the third in a row that
banks saw default ratios receding, which, although positive, was
more the result of a risk-off approach implemented by Ita and
peers in recent months than an improving economy, said
Marcelo Henriques, an analyst with BTG Pactual Group.
In addition, income from the trading of bonds, stocks and
other financial instruments fell on expectations that policymakers
could raise borrowing costs to head off inflation. The trend likely
continued into the second quarter, Henriques said.

TRENDS IN MARGINS, DEFAULTS

Shares of those three banks are up a combined 0.3% this

year, while the benchmark Bovespa stock index has dropped
14%. Potential swings in the price of those stocks hinge on
underlying trends in interest income and margins, default
ratios and provisions - the money they set aside to write off
souring loans, analysts said.
Bradesco, Brazils No. 2 private-sector lender, is scheduled
to release first-quarter earnings on Monday before markets
open. Net income excluding one-off items, known as
recurring profit, is expected to rise by 2% to 2.98 bln reais
($1.38 bln) on a quarter-on-quarter basis, according to the
average estimate of 10 analysts in the poll.
Return on equity, a gauge of profitability for banks known
as ROE, likely sank by about 2 percentage points to 17.1% in
the quarter, reflecting stagnant interest income, an uptick in
expenses and lower net interest margin, the poll showed.
Banco Santander Brasil, the nations largest foreign
lender, is forecast to post a 14.2% quarter-on-quarter drop in
recurring profit to 1.33 bln reais. The ten analysts polled

expect strong loan-book growth, rising nonperforming loans

and slightly higher provisions at the lender, which is set to
post earnings on April 25 before markets open.
Santander Brasils ROE probably plummeted to an
average 9.5% in the quarter. Loan delinquencies climbed to
5.6% of total loans from 5.5% in the prior quarter.
Recurring net income at Ita Unibanco, Brazils most
profitable bank, likely slipped 1.4% to 3.45 bln reais on a
quarterly basis, a poll of 11 analysts showed. Despite the
decline in profit, operational trends are expected to be more
favorable, the poll found.
Provision expenses likely fell 7.5% to 4.619 bln reais,
below managements guidance. Net interest margin came
slightly lower in the quarter, the poll found.
Ita reports earnings on April 30 before markets open.
ROE is expected at 18.6%, up from 18.4% in the prior three
months, after expenses fell an average 0.6% and the default
ratio fell to 4.7%, the lowest level in seven quarters.
Following is a table with analysts first-quarter earnings
expectations. Comparisons are made with the prior three
months.
ITAU
Recurring profit
Percent change

3.45 bln
-1.4%

BRADESCO
2.98 bln
+2.0%

Return on equity 18.6%

17.1%
Percent change +0.2 pps -2.1 pps

SANTANDER
1.33 bln reais
-14.2%
9.5%
-2.7 pps

Default ratio
Percent change

4.7%
4.1%
5.6%
-0.1 pps unchanged +0.1 pps

Provisions
Percent change

4.62 bln
-7.5%

3.17 bln
-5.7%

3.40 bln reais

+2.8%

($1 = 2.01 Brazilian reais)

Nokia sales tumble despite Lumia pick-up

A sharp fall in sales of Nokias basic phones overshadowed a
stronger performance from its Lumia smartphones in the first
quarter, rekindling fears over its future and sending its shares
tumbling to year lows.
The results renewed pressure on Chief Executive Stephen
Elop, who was hired in 2010 to turn the Finnish mobile phone
maker around after it fell behind rivals Samsung and Apple in
the smartphone race.
He made the controversial decision to switch to Microsofts
untried Windows Phone software in early 2011 and had said the
transition would take two years, a period thats now over.
Analysts said he was running out of time.
Basically, he has only the second quarter, said Mikko
Ervasti at Finnish investment banking and wealth management group Evli.
Nokia said it sold 5.6 mln units of Lumia handsets in the
first quarter, up from 4.4 mln in the previous quarter, and forecast stronger growth in the current quarter.
But shipments of mobile phones slumped 21% to 55.8 mln
units, a far steeper decline than the 8% fall that markets expected, with unit sales down in every region.
As a result, overall net sales fell 20% to 5.9 bln euros from a
year earlier, far short of the 6.5 bln euros forecast by analysts.

STAYING RELEVANT

Nokias future is seen depending on higher-margin smartphones as a growing number of global consumers want access
to apps such as Twitter from their handsets.
But it still sells more regular mobile phones than smartphones, and needs to protect its position in the basic handset
market so buyers of its cheaper handsets dont defect to other
brands when they eventually upgrade to smartphones.
In markets such as China, Nokia faces strong competition
not only from rivals such as Samsung but also from emerging,
cut-price competitors.
Nokia recently launched a 15 euro phone in an effort to

boost its share in emerging markets, and Elop said it would also
revamp its Asha range of mid-tier feature phones this year.
Analysts also said that while the pick-up in Lumia was
encouraging, rivals werent standing still either.
Samsungs Galaxy S4 is set to go on sale later this month
and is expected to outsell its predecessors with monthly sales of
around 10 mln.

NSN LIFTING CASH POSITION

In addition to Lumia sales, first-quarter results showed a few

bright spots, helped by equipment venture Nokia Siemens
Networks (NSN), once a cash drain for co-parents Nokia and
Siemens but now profitable after massive cost cuts and a focus

on fourth-generation (4G) Long Term Evolution (LTE) networks has begun to pay off.
While NSNs quarterly sales were slightly weaker than analysts had forecast, its underlying profit, or adjusted earnings
before interest and taxes (EBIT), of 196 mln euros was higher
than the 121 mln euros that markets expected.
Nokias shares fell 12.7% to a year-low of 2.30 euros, above
the all-time low of 1.33 hit last year, but a far cry from their 65euro peak in 2000.
Nordea analyst Sami Sarkamies said the weak results in
mobile phones may force analysts to reconsider what they see
as the sum value of the companys parts, which include its
handset business, Navteq mapping unit and stake in NSN.

Oracle fixes 42 holes in Java

Oracle Corp released a major security update for the
version of Java programming language that runs inside
Web browsers to make it a less popular target for hackers.
The patch fixes 42 vulnerabilities within Java, including the vast majority of those that have been rated as
the most critical, said Oracle Executive Vice President
Hasan Rizvi.
One widespread hacking campaign disclosed this year
infected computers using Microsofts Windows and Apple
software inside hundreds of companies, including
Facebook, Apple and Twitter.
The situation grew so bad earlier this year that the U.S.
Department of Homeland Security recommended that
computer users disable Java in the browser. But many
large companies use internal software that relies on Java
and have been pressing Oracle to make the language safer.
The most significant change will be that, in the default
setting, sites will not be able to force the small pro-

grammes known as Java applets to run in the browser

unless they have been digitally signed. Users can override
that only if they click to acknowledge the risk, Rizvi said.
Oracle inherited Java when it bought Sun Microsystems
in 2010. It is the companys greatest exposure to the mass
market, as versions of Java run on desktops, in telephones
and other devices and on servers.
The browser version, however, has been especially
prone to security problems.
Last year, Java surpassed Adobes Reader as the most
frequently attacked piece of software, according to security
software maker Kaspersky Lab.
Java was the vehicle for 50% of all cyber attacks last
year in which hackers broke into computers by exploiting
software bugs, according to Kaspersky. That was followed
by Adobe Reader, which was involved in 28% of all incidents. Microsoft Windows and Internet Explorer were
involved in about 3% of incidents, according to the survey.

April 24 - 30, 2013

financialmirror.com | GREECE | 25

Banks try to raise 27.5 bln

l HFSF to cover Eurobank rights issue
Greeces four leading banks are trying to raise funds to
cover massive holes left behind by the countrys debt restructuring, with one bank turning to the government for help and
another saying it has enough money to prevent giving up
management control to the state.
National Bank of Greece, Eurobank Ergasias, Alpha Bank
and Piraeus Bank need to raise some 27.5 bln euros after they
were wiped out by the countrys 200 bln debt restructuring last
year.
Eurobank admitted on Monday to being the first domestic
bank to fall under state control, dropping plans to raise money
from investors that would have secured management control
of the lender. It said its board decided that the Hellenic
Financial Stability Fund (HFSF) will fully cover a 5.8 bln euro
rights issue and it could be recapitalised as early as next week.
As one of the four systemic banks, Eurobank intends to
actively engage in the strategic restructuring of the Greek
banking system through the acquisition of smaller nonsystemic banks, it said.

Its shares plunged 30% at the opening of trade on Tuesday

to 16 cents.
The news comes after the countrys central bank halted earlier this month Eurobanks merger with NBG, at a time of fears
by international lenders that the combined entity could
become too big to be bailed out by the government.
As part of Greeces latest 173 bln euro bailout by its eurozone peers and the IMF, some 50 bln has been set aside to
recapitalise the four big banks, that combined control some
80% of all banking assets. Under the terms of the plan, the
banks must secure 10% of their capital needs from the private
sector to maintain management autonomy and retain their
private character.
The HFSF bank-rescue fund will underwrite the balance
but will have only restricted management rights if its share is
less than 90%.
On the other hand, Piraeus Bank said it has enough money
to meet the 10% threshold after it agreed to take over
Millennium Bank, the Greek unit of Portuguese lender Banco

Tourism seen bouncing back

to pre-crisis levels
l Political calm, fewer protests encourage visitors; Revenues

seen up 9-10%; Arrivals to rise 6-7% to record 17 mln

Greek tourism revenues are expected to bounce
back this year to pre-crisis levels following the return
of political stability to the country, with visitors from
Germany, Britain and Russia expected back.
The country has pinned its hopes on its sundrenched beaches and ancient monuments to pull itself
out of a deep recession. Tourism is the economys
biggest cash-earner, accounting for about 17% of output.
Andreas Andreadis, head of Greeces main tourism
body SETE, said revenues are seen rising by up to 10%
this year to 11 bln euros on the back of an expected
record 17 mln visitors.
We are heading for a
record year in terms of foreign
tourist arrivals, he said in an
interview with Reuters. Our
target of about 11 bln euros in
direct revenues is feasible and
we may even exceed it.
If SETEs forecast is met,
receipts will rise to their highest level since 2009, when
Greeces debt crisis began.
That sparked violent street
protests that scared off visitors.
Hoteliers, restaurant owners and tourism businesses
have slashed prices and
upgraded their services to
weather the crisis and lure more visitors, Andreadis
said. A better mix of tourist markets - tourists who stay
longer and spend more on average - will also help the
rise year on year, he said.
About 40% of hotels are now listed under the 4-star
or 5-star categories, up from 25% during the 2004
Athens Olympics, he said, adding that positive feedback
from last years visitors had also helped pre-bookings.
Fears that Greeks would be negative towards
tourists - Germans for instance - were dismissed last
year and now fears have been replaced with confidence, said Andreadis.

STABILITY

Summer bookings from Germany and the UK were

up 15% and 20%, respectively, mainly due to reduced
uncertainty over the countrys future in the euro zone
and fewer violent protests since a stable government

took over in June, he said.

Greeces main competitors are Spain, Croatia,
Turkey and Egypt. Political uncertainty and turmoil in
Egypt is turning some visitors towards Greece,
Andreadis said.
What usually affects tourism is strikes and social
unrest, he said. Greece is very quiet this year compared with Italy, Spain and Portugal, its business as
usual.
A popular summer destination for decades, mainly
with Germans and Britons, Greece is now attracting
increasing numbers of tourists from Eastern Europe.

Comercial Portugues SA (BCP). The news sent Piraeus shares

16% higher on the Athens bourse.
BCP will sell Millennium for 1 mln euros and will invest 400
mln in Piraeuss upcoming rights issue. In addition, BCP will
recapitalise its Greek unit before the sale closes by 400 mln
euros. About 139 mln of that has already been injected.
We are confident that we can achieve an even higher participation of private investors, in this landmark rights issue of
Piraeus Bank, said Michalis Sallas, chairman of Piraeus Bank.
The ASE banking stocks index rose 18% on hopes the
other two lenders, NBG and Alpha, will follow suit and also
keep control of management. In Lisbon, BCP shares trimmed
gains of more than 4% to end up 2.1%, with investors
cheered by news of the deal. Its Greek unit has long been a
drag on Group results, which is also struggling with a recession at home.
With the transaction, BCP will lower its risk-weighted
assets by about 4 bln euros, in turn raising its capital ratios. As
of December, the banks core tier 1 ratio was 9.8%.

OPAP shares fall after single bid

Shares in gambling monopoly OPAP fell 5.2% on the Athens bourse on
Tuesday after the government got only one valid bid by investors to buy a
stake, at a discount to the companys market value.
Greece said late on Monday it was seeking a higher offer for the sale of a
33% stake in OPAP after a low bid of 622 mln euros from the bid vehicle
called Emma Delta backed by shipping tycoon George Melisanidis and
Czech investor Jiri Smejc.
The offering price came at a discount of about 16% to OPAPs closing
share price of 7.08 euros on Monday. The shares are falling because the
offer came at a discount, said IBG analyst Dimitris Birbos.

EU deepens probe into

Aegean-Olympic deal
EU antitrust regulators have deepened their investigation into the
second takeover bid by Aegean Airlines for Greek rival Olympic Air, citing concerns about the combined groups market power in Greece.
The European Commission said that it would now decide on the 72mln-euro deal by September 3.
The Commission has concerns that the transaction may lead to
price increases and poorer service on several domestic Greek routes out
of Athens, where the merged entity would have a monopoly or an otherwise strong market position, it said in a statement.
The Commission blocked Aegeans first takeover attempt in 2011,
worried that the merged company would have a quasi-monopoly of the
Greek air travel market.

ND regains narrow lead in poll

A 30% rise in Russian tourists will also add to revenues, Andreadis said. Almost 900,000 Russians visited
Greece in 2012, a threefold increase in just three years.
Russians stay longer and spend more than the average foreign visitor. According to central bank data for
2012, they accounted for 9.4% of all receipts, much
higher than their 5.6% share in arrivals.
Greece expects tourism to rebound strongly enough
to offset the impact of the Cypriot crisis on the Greek
economy. The tourism industry employs one in five
people in a country where unemployment has climbed
to 27% and the economy is in recession for a sixth consecutive year.
Domestic tourism, which has been severely hit as
austerity-hit Greeks are cutting down on expenses, was
expected to remain at last years depressed levels.
We wont see an increase but there will be no further drop either, he said.

The ruling conservatives have regained a narrow lead over anti-bailout leftists, an opinion poll published on Saturday showed.
A survey by Metron Analysis for Sundays Eleftherotypia newspaper put
support for New Democracy at 18.7%, giving it a 0.6 percentage-point lead over
the radical Syriza party.
Prime Minister Antonis Samarass New Democracy party, which won elections last June with 29.6% of the vote, has been neck-and-neck with the antibailout Syriza in recent polls. In a previous Metron Analysis poll in March, New
Democracy trailed Syriza by 0.3 percentage points.
New Democracy has been behind Syriza for months following the June 17
vote but managed to grab a poll lead in January after securing international
bailout funds to avert bankruptcy and allay doubts over Greeces future in the
euro. Samaras has since been trying to show Greeces international lenders
that his country is determined to achieve its bailout targets.
The troika of creditors concluded their review of the countrys bailout
plan earlier this month, giving Athens a clean bill of health, which secures a
disbursement of at least 2.8 bln euros in aid.
Their next inspection is expected to take place in June and by then Greece
must have carried out its first big privatisations and set out how it will cover a
budget shortfall of 2 to 4 billion euros for the year 2015 and 2016. The poll also
showed that 68% think the current situation is worse than a year ago.
Greeks have lost almost a third of their disposable incomes since the debt
crisis started more than three years ago, mainly due to repeated waves of austerity and tax hikes in turn for foreign aid. But the coalition government has
ruled out taking any new austerity measures, hoping for a recovery of the
economy after five years of recession.

April 24 - 30, 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
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 Book Value

2011
euro
Times
EUR ('000)
T

. . .

Value
euro
A
EUR

Profit/(Loss)

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

66 307
18 224
11 326
5 527
101 383

1.24
0.25
0.78
0.75
0.54
0.27
0.64

0.14
0.33
0.08
0.04
0.10

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
30 932
29 236
16 100
16 368
8 989
5 038
4 100
4 275
3 850
3 930
2 688
239 826

1.76
3.20
0.28
0.48
0.26
4.69
0.30
3.16
0.09
1.91
0.05
0.53
1.39

0.14
0.13
0.57
0.19
0.22
0.14
0.43
0.16
1.06
0.06
0.68
0.11
0.32

14 631
1 587
5 408
25 030
2 239
5 101
242
4 867
576
7 289
6 887
1 249
21 054
4 130
27 716
2 096
4 617
743
6 160
3 135
4 692
2 306
10 800
335
948
10 842
1 781
11 934
4 559
5 694
7 735
941
164
31 833
62 563
1 658
15 298
5 421
298
1 650
2 557
2 727
6 825
3 175
207
196
75 000
416 894

0.49
0.02
0.49
0.73
0.80
0.33
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
0.38
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

0.30
0.56
0.10
0.87
0.18
0.11
0.06
0.11
0.03
0.46
0.36
0.90
0.07
0.22
0.16
0.30
0.20
0.19
0.57
0.23
0.43
0.18
0.11
-0.32
1.27
0.10
0.26
0.86
0.20
0.07
0.28
0.12
0.47
0.38
0.54
0.19
3.25
0.45
0.03
0.43
0.15
0.03
0.09
0.64
0.25
0.18
5.08
0.46

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

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

0.26
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
-1 354
-575
1 324
-34 500
3 181
-50
-1 753
-1 071
1 012
-5 616
-3 338
-36 616

2011

9M '11

9M '12

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

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
-802
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
-87 899

P/E ratio
2012

0
0
-23 440
2 040
-8 443
-30 442
-60 285

2012
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
-670
-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
-104 609

n/a
n/a
n/a
8.93
n/a
n/a
1.61

4.48
n/a
n/a
12.16
n/a
2.83
n/a
n/a
n/a
3.80
n/a
n/a
6.03

Cents
-76.37
-89.79
-3.78
2.75
-3.43
-6.61

Cents

1.50

6.10

Cents
5.36
-1.88
-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

%
9.63
3.49

2.10

22.83

Cents
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
-3.73
-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

10.63

0.45

4.17

1.70

2.38

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

97.19
37.99
103.58

114.86
44.40
168.87

-15.38
-14.44
-38.66

113.87
0.278
0.047
0.177
0.300
0.048
0.019

83.34
0.185
0.040
0.107
0.226
0.043
0.012

88.12

104.69
0.251
0.044
0.175
0.263
0.045
0.018

-15.83
-38.86
-6.46
2.22
-33.33

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

566.47
0.220
0.410
0.160
0.092
0.054
0.612
0.130
0.500
0.095
0.100
0.032
0.056

567.79
0.240
0.430
0.160
0.092
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

-9.50
-4.00
-2.05
-12.57
-20.00
0.00
-36.19
0.00
0.00
0.00
10.00
0.00
-3.45

657.64

624.36

624.36
0.148
0.010
0.049
0.640
0.145
0.036
0.024
0.045
0.002
0.299
0.033
0.243
0.153
1.350
0.301
0.140
0.057
0.055
0.385
0.009
0.138
0.480
0.108
0.015
0.119
0.350
0.099
0.585
0.073
0.056
0.179
0.012
0.011
0.075
0.715
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
0.153
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

-1.92
-3.27
-16.67
8.89
-1.54
-19.44
-12.20
0.00
7.14
-50.00
3.10
-10.81
-10.00
0.00
-9.40
-13.01
0.00
-21.92
0.00
0.00
0.00
-1.43
0.00
0.00
0.00
0.00
-9.09
11.24
0.00
5.80
5.66
-2.72
-7.69
0.00
0.00
-2.46
0.00
-23.08
0.00
0.00
0.00
6.06
-10.87
-8.70
0.00
0.00
0.00
0.00

0.107
0.246
0.046
0.012

% Change

since

April 24 - 30, 2013

financialmirror.com | CSE PRICES | 27

CSE
CODE
OASIS

K.

APPROVED INVESTMENTS / EENYTIKOI OPAN.

INVESTMENT INDEX
ACTIBOND GROWTH FUND
ACT

APOLLO INVESTMENT FUND

APOL

CYTR

CYTRUSTEES INV. PUBLIC CO

DEM

DEMETRA INV. PUBLIC CO.

DODONI PORTFOLIO
DOD

HARVEST CAPITAL
HCM

INTERFUND INVESTMENTS
INF

ISCHIS INVESTMENT
ISXI

KARYES INVESTMENTS
KAR

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
A. PANAYIDES CONTRACTING
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
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
APC
AST
CFL
CHAP
CBH
CAIR
DHH
TLM
DOME
EFR
EMP
ERP
CONF
ACS
KAN
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

0.0369
0.1914
0.2682
0.7174
0.0070
0.0660
0.1709
0.0589
0.2229
0.0265
1.0430
2.1427
0.6125
0.2000

-53.93
-51.41
-66.82
-70.73
-71.43
36.36
-70.74
-26.99
0.94
-24.53
-23.30
-6.66
-15.10
37.50

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

81 202
128 936
36 572
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
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
0.43
0.09
0.85
0.85
0.85
0.17

993
5 222
3 960
42 000
565
1 260
2 827
473
418
405
2 183
5 458
709
3 704
70 177

0.21
0.17
0.35
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
0.17
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
3 657
5 296
207
1 600
12 375
9 388
157
23
15 000
285
35 890
752
148
7 256
7 833
218
1 910
8 582
189
1 971
10 843
510
1 619
773
2 925
140
1 889
77
1 240
58 824
204 764

0.1728
0.06
0.88
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
0.11
0.38
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

1 033 044

MARKET TOTAL / OIKO AOPA

-98.84
1.68
0.11
2.41
-0.03
0.27
-0.03
-0.19
-0.01
-0.07
0.46
0.29
15.00
0.12
-70.00
0.34
0.19
0.09
0.12
2.46
0.00
0.56
0.32
2.75
0.01
0.44
0.20
6.67
-0.05
-0.08
1.51

-737
-4 301
-10 771
-14 853
-6 892
-255
-9 493
-86
-180
-150
331
-136
-36
-403
-47 962

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
-56
-182
155
-1 921
12
-383
-10 978

2011

2012

-69
-12 265
399
-6 400
-2 974
-5 512
-3 840
-23 885
-9 100
-243
-701
35
-4 283
-219
-1 465
-24 581
-77
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
-157 731
-5 499 982

18

-17 728

18

-17 728

-1 014
-12 265
-350
-6 400
-217
-11 266
-1 569
-55 832
-9 100
-391
-70
35
6 553
-2 111
-1 465
-220
-77
87
-3 654
-713
-11 700
-438
35
494
-8 648
-959
-410
-450
-15 756
921
-60
-824
-137 834

-1 166 383

-1 909 991

-350 322

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
-2.80
-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

462.96
0.017
0.093
0.089
0.210
0.002
0.090
0.050
0.043
0.209
0.020
0.800
2.000
0.520
0.275

546.03
0.017
0.115
0.119
0.250
0.004
0.078
0.048
0.043

0.002
0.101
0.100
0.053
0.041
0.032
0.077
0.024
0.001
0.003
0.600
0.025
0.750
0.024
0.003
0.100
0.130
0.010
0.045
0.139
0.001
0.230
0.160
0.011
0.020
0.080
0.054
0.002
0.003
0.002
0.010
0.650

0.002
0.101

0.210
0.020
0.800
2.000
0.520
0.250

% Change

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

-15.21
0.00
-19.13
-25.21
-16.00
-50.00
15.38
4.38
0.00
-0.48
0.00
0.00
0.00
0.00
10.00

0.00

n/a

n/a

-1.25
-9.51
-0.96
-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
0.40
-8.61
-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

25.00

0.128

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
0.005
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

-21.88
-

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
7 799
569 801

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
0.42
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 24 - 30, 2013

28 | BACK PAGE | financialmirror.com

In earnings frenzy, will Apple get crushed?

l

Major US indexes post largest weekly declines

WALL ST WEEKAHEAD

Apple may have lost nearly half of its value since its peak in
September, but it is still the talk of the town. Only this time,
its all about how low can it go?
Wall Street would normally be set for a technical rebound
after a drop of more than 2%, the worst weekly decline so far
this year. But that could easily change by the time the iPhone
maker reports its earnings, which are due on Tuesday after the
closing bell.
Its not the $700 stock anymore, but Apple still has huge
weighting on indexes, and its still the window into the state of
consumers, a sort of reality check, said James Dailey, portfolio manager of Harrisburg, Pennsylvania-based TEAM
Financial Asset Management.
Wall Street has been recently pressured by a slew of disappointing economic data and weaker-than-expected earnings
reports from blue-chip companies like IBM.
For the week, the Dow fell 2.1%, the S&P 500 also lost 2.1%
and the Nasdaq slid 2.7%.
The critical level next week would be 1,540 on the S&P
500, which is near the 50-day moving average, said Andre
Bakhos, director of market analytics at Lek Securities in New
York.
He added that a dip below this mark would bring additional weakness to as low as 1,500 levels.
On Friday, the benchmark S&P 500 index closed at
1,555.25.
With the earnings season in full swing, the growth in S&P
500 companies first-quarter earnings is now estimated at
2.2%, up from an April 1 forecast for growth of 1.5%, according to Thomson Reuters data, based on results from 104 companies and estimates for the rest.
Of the companies that have reported, 67.3% have beaten
analysts earnings expectations, while just 43.3% have beaten
revenue estimates. Revenue growth is seen at just 0.7% for the
first quarter over the year-ago period.

About a third of S&P 500 companies and a third of the Dow

components - ten blue-chip companies - are scheduled to
report earnings next week.
Among Dow stocks, Caterpillar kicked off on Monday, followed by DuPont, United Technologies Corp and Travelers on
Tuesday.
Boeing and Procter & Gamble report on Wednesday, followed by Exxon Mobil on Thursday. Chevron wraps up the
week by reporting on Friday.

APPLE BRUISED BY THE BEARS

Once a Wall Street darling, Apple faces tough questions

from shareholders this week. Its stock is down more than 40%
from its peak in September.
And for this year alone, Apple is down 27% - still firmly in
the grip of a bear market, which Wall Street defines as the loss
of 20% or more from a recent peak.
The company is expected to report a mere 8% gain in quarterly revenue, among the weakest displays of quarterly growth
in years, according to average analysts estimates, polled by
Reuters.
Earnings per share are expected to fall 18% as Samsung
Electronics and other hard-charging rivals erode Apples market share and put pressure on its margins.
The market is aware that Apple is not going to report good
numbers, Dailey said. But it will be interesting to see how
the stock reacts, considering that its already been pressured,
leading up to the earnings announcement, Dailey said.
Apple shares closed below $400 on Thursday for the first
time since December 2011. The stock has shed more than

$280 bln in market value since peaking at more than $700 a share in
September.
On Friday, the stock closed down
0.4% at $390.53.
But Apple, which was once the
worlds most valuable company, is
trading at nine times trailing earnings. And 45 of 58 analysts polled by Reuters give the stock a
strong buy or buy rating.
According to Thomson Reuters Starmine, Apples intrinsic
value - a price target based on expected growth rates over the
next decade - was about $565 a share.

HOME SALES AND GDP ON TAP

Economic indicators in the coming week will cover housing, manufacturing and a first look at first-quarter gross
domestic product. In the housing sector, March figures for
existing home sales are due on Monday and new home sales
on Tuesday. Economists polled by Reuters have forecast slight
gains in both March existing and new home sales over
February figures.
U.S. durable goods orders for March will be released on
Wednesday, with the forecast calling for a drop in March following Februarys gain. Durable goods are manufactured
goods, such as washing machines and refrigerators, meant to
last three years or more.
Thursdays data on weekly U.S. initial claims for jobless
benefits are projected to dip to 351,000 for the latest week.
On Friday, Wall Street will get a snapshot of the broad economy, measured by gross domestic product, or the output of all
goods and services inside U.S. borders. First-quarter GDP is
forecast to have grown at an annual rate of 3%, compared with
growth at an annual pace of just 0.4% for the fourth quarter.
A final reading for April on U.S. consumer sentiment will
come out on Friday from the Thomson Reuters/University of
Michigan Surveys of Consumers. The forecast calls for a blip
higher to a reading of 73.0 from a previous reading of 72.3.