May 8 - 14, 2013

2 | NEWS | financialmirror.com

DAX hits record as Europe rallies

Robust results from heavyweight banks drove
European shares to fresh peaks on Tuesday, with
Germanys benchmark stock market rising to a record
high.
Most investors felt European equities would continue
to rise gradually this year, even if there was a near-term
pause to the rally, with equities offering better returns
than bonds, whose returns have been hit by interest rate
cuts by major central banks.
The pan-European FTSEurofirst 300 closed up 0.3% at
1,220.94 points, its highest in five years, while higher
profits at HSBC helped the STOXX Europe 600 Bank
Index rise 2%.

Germanys DAX ended up 0.9% at a record closing high

of 8,181.78 points. The index had earlier reached an alltime intraday peak of 8,206.01 points.
The euro zones blue-chip Euro STOXX 50 also
advanced 0.7% to 2,769.08 points, its highest close in two
years.
Hendrik Klein, who runs Swiss asset management firm
Da Vinci Invest AG and has a long position betting on
further gains for European equities, felt the DAX could
reach 9,000 points by the end of 2013.
I dont think its the end of the rally, said Klein.
The FTSEurofirst 300 has risen 8% since the start of
2013, while the Euro STOXX 50 has advanced 5%.

The ECB last week cut interest rates to a record low of

0.50%, and some traders felt that backdrop of central bank
support would prevent any major pull-back on stock markets.
The DAXs rise also pushed the German market back to
levels last seen in mid-2007, before the onslaught of the
global financial crisis in the following year.
However, Darren Courtney-Cook, who heads trading at
Central Markets Investment Management, argued that
investors who bought into markets such as the DAX at
current levels risked buying at the top and could be
exposed to any short-term retreat as investors sell shares
to book profits on gains made so far.

Deflation comes fast for Cyprus

The severe financial crisis that started with the Eurogroup
meeting on 15th March appears to have led to almost
immediate deflation in Cyprus, with the consumer price index
dropping over the year earlier by 0.3% in April.
Compared with the previous month, prices fell by 0.5%.
The Statistical service said that this was mainly due to
decreases in the prices of electricity, certain fresh vegetables,
petroleum products and rents.
It is also known that coffee shops and bakeries slashed prices
on popular items in an effort to retain customers.
For the first four months of the year the CPI rose by 1.0%
compared with the corresponding period of 2012.
Deflation has come faster to Cyprus than Greece, which
experienced its first deflation since 2008 only in April,
according to EU-harmonised consumer price inflation data.
The EU-harmonised rate for Cyprus shows a small increase
of 0.1% in April.
Other bailout countries such as Ireland and Portugal were
several months into the crisis before they saw deflation.
www.sapientaeconomics.com
CONSUMER PRICE INFLATION
% change over same period of previous year
Food & non-alcoholic beverages
Alcoholic beverages & tobacco
Clothing & footwear
Housing, water, electricity & gas
Furnishings, household equipment & supplies
Health
Transport
Communication
Recreation & culture
Education
Restaurants & hotels
Miscellaneous goods & services
General Consumer Price Index

APR

JAN-APR

0.5
8.1
-6.9
-2.0
-0.7
-1.8
1.0
0.6
0.6
0.7
0.6
1.1
-0.3

0.2
9.8
-3.2
1.9
-0.3
-0.9
3.6
1.3
0.9
0.8
0.7
1.1
1.1

Source: Cystat.

Euro zone sentiment rises

as Italy, Cyprus worries ease
Euro zone sentiment improved in May as investors views on
the outlook for the currency bloc steadied following two months
of declines sparked by uncertainty in Cyprus and Italy.
Sentix research group said on Monday its monthly index
tracking investor sentiment in the 17-nation currency bloc rose
to -15.6 in May from -17.3 in April, just short of the consensus in
a Reuters poll of economists for -15.2.
While investors assessments of the economy for the euro
zone are stabilising, those for Germany are clouding a little, albeit
at a significantly higher level, Sentix said in a statement.
Sentix said an inconclusive election result in Italy and an
international rescue package for Cyprus had weighed on the euro
zone index in the previous two months.
A right-left government finally took power in Italy in late April,
some two months after the election there, while in Cyprus the
parliament approved the painful bailout plan.
A sub-index of euro zone expectations rose to 2.8 from 0.5 in
April, while the index on Germany fell to 15.2 from 17.6 in April.
While Germany - Europes largest economy - initially warded
off the three-year old euro zone debt crisis, it contracted in the
final quarter of last year. The government now sees growth of just
0.5% for 2013.
It must be noted that the index for Germany at 15.2 moves
at a much higher level than that for the euro zone at -15.6,
Sentix said. But ... investors are becoming aware again of the
fact that Germany is not an island within the euro zone.

EC sees Cyprus in deep recession

Cyprus will enter deep recession and face a rise in unemployment, deficit and debt ratios, following a bailout agreement with the Troika of international lenders (European
Commission, ECB, IMF) and accompanying austerity
measures, the European Commissions spring forecast said
Friday.
According to the report, the Cyprus economy will enter
a recession, with its GDP shrinking by 8.7% in 2013 and by
3.9% in 2014.
The Commission report said the countrys deficit

reached 6.3% of GDP in 2013 while it is projected to go up

to 6.5% this year and 8.4% in 2014.
Cyprus public debt stood at 85.5% of GDP in 2012, while
this is expected to climb to 109.5% in 2013 and to 124% in
2014.
The economy in recession is further expected to lead to
increased unemployment, from 11.9% in 2012 to 15.5% in
2013 and to 16.9% in 2014. The rise is a result of shrinking
employment rates, which contracted by 6.6% this year and
is estimated to continue shrinking by 3.1% in 2014.

France, Germany to press Google on tax

Politicians in Germany and France say they will press for
Google to be quizzed on corporate income tax after a Reuters
report highlighted how the company employs sales staff in the
UK while telling the tax authorities that sales are made from
Ireland.
The report showed the company advertised for sales staff
to negotiate and close deals, although a Google executive
had told parliament its London-based employees did not sell to
UK clients. British MPs plan to call Google to testify again to a
parliamentary committee to clarify what work it does in
Britain.
Currently Google, which makes most of its money through
selling advertisements, has no taxable presence in France,
Germany or Britain, allowing it to operate almost tax-free in
these countries.
Like Google UK, Google designates its French and German
units as providers of marketing and support services to Google
Ireland, which pays most of its turnover to an affiliate in
Bermuda; and gives the subsidiaries enough to cover their
costs and generate a small taxable profit.
In 2011, French tax authorities raided Google in an investigation of whether its Paris office does sales work, and the country has asked the company for 1.7 bln euros in back taxes.
Pierre-Alain Muet, vice-president of the French National
Assemblys finance commission and a member of the ruling
Socialist party, said he planned to quiz Google about the apparent inconsistencies when it appears before a parliamentary

committee this month looking into how multinationals structure themselves to minimise tax bills.
If this is true then it seems to me that the tax administration can already intervene ... It would no longer be a case of fiscal optimisation, but of an operation in a country thats being
falsely delocalised, he told Reuters.
Philippe Marini, senator with the UMP centre-right opposition, said the evidence from France would boost the case the
French tax authority already has against Google.
Marini, who heads the Senates finance commission, has
pushed for a tax on online advertising and ecommerce since
2010.
In Germany, Sven
Giegold, MEP for the Green
Party, said he would call on
the tax authority in
Hamburg, where Google
Germany is based, to investigate the companys
affairs.
Google should publicly
explain the apparent discrepancy between the different statements it has
made about the nature of
its German units business,
he said.

May 8 - 14, 2013

financialmirror.com | CYPRUS | 3

Cyprus, Israel reiterate close ties

l

Talks focus on energy cooperation, EastMed security

The leaders of Cyprus and Israel have reiterated the close

ties between the two countries that improved in the 1990s and
have recently reached a new level after the discovery of oil and
gas deposits in the eastern Mediterranean and the prospect for
cooperation. But the rejuvenated relationship has also called
into question the regional alliances, particularly the military
discipline with which one can describe Israels friendship with
Turkey. The most common phrase during Nicos Anastiades
meetings with Prime Minister Benyamin Netanyahu, Israels
President Shimon Peres and Knesset Speaker Yuli Edelstein
was we are friends, as if the host government was making an
extra effort to convince the visitors of their true intentions,
without upsetting the quirky relationship that Tel Aviv has
with the Ottoman Republic.
Just before hopping onto a plane that would take him on a
5-day trip to China, Netanyahu promised that Israel would
continue to maintain good ties with Cyprus, regardless of its
newly-rekindled relationship with Turkey. At a press conference after the meeting, Anastasiades said that Israel and
Cyprus had embarked on a strategically important dialogue
with a view at enhancing and further developing our bilateral
ties, which are founded on common principles and values.
In an interview with Israels Channel Two, the Cypriot president said that he and Netanyahu had agreed, among other
things, to cooperate on military projects to protect the gasfields
common to both countries. Netanyahu promised,
Anastasiades said, that Israel would maintain relations with
Cyprus and work with the country to protect the offshore gas
fields, regardless of any deals it makes with Turkey, or any
threats issued by Ankara.
The political declaration repeated what the Defence
Ministers of the two countries had said last week. Fotis Fotiou
said that during his meeting in Tel Aviv on Thursday with his
Israeli counterpart, they also decided to set up technical committees to promote defence issues and agreed to raise their
military cooperation to new levels.
He said that the first meeting of these committees will take
place in Cyprus on May 28, adding that our cooperation with
Israel is no threat to anyone. On the contrary, it aims to promote peace, security, stability and development in the region
and it is not directed against any state. Fotiou did not rule out
similar cooperation with other neighbouring countries such as
Greece, Lebanon and Egypt, saying that Moshe Yaalon will pay
an official visit to Cyprus in the next weeks.
On his part, the Israeli minister was quoted by the media as
saying, we intend to improve the preparedness of our navy in
the Mediterranean to protect the gas facilities, and we certainly look forward to cooperation on this issue with Cyprus.
With four offshore gasfields already locating from 37 trln
cubic feet of potential natural gas reserves, Cyprus is considering to allow Israels air force to use the base at Paphos for

patrols in the eastern Mediterranean to prevent terrorist

attacks on drilling platforms or future pipelines. Turkey, on the
other hand, has continued its provocation and threatened to
explore for oil and gas on its own within the Cyprus Exclusive
Economic Zone, despite exploration licenses being awarded to
the U.S. Noble Energy, French Total, Italys ENI and Seoulbased Kogas.

RELIABLE NEIGHBOUR

Cyprus is Israels most reliable neighbour, Anastasiades said

on Tuesday, adding that the discovery of oil and gas in the
eastern Mediterranean creates new prospects for the relations
between the two countries.

We will move on with our relations to see how we can support each other, how we Europeans can contribute in anything
that concerns you. We need you. I am not saying that you need
us. And you dont simply have a neighbour close to you but a
brother and we will go on this way. We must work together in
order to bring peace, stability and welfare.
Shimon Peres said that the two countries are linked to each
other in many ways, adding that without Cyprus, Israel lies far
from Europe.
In statements to journalists, President Anastasiades said
that with the decision to build a liquefaction terminal across
from the Suez Canal, Cyprus will be offering to those who
want to take advantage of it, the infrastructure for exporting
to the Far East but also to Europe.
He added that there was interest from Israeli companies
that are involved in the exploitation of natural gas to be also
participants in the investment for the construction of the terminal at Vassiliko. Both Delek and Avner are a 30% stakeholder in Block 12, the gasfield explored by U.S.-based Noble
Energy that will be deploying an appraisal drill next month to
confirm the 7tcf of natural gas deposits.

Turkey condemns Israeli air strikes in Syria

The ink on Benyamin Netanyahus apology over the Mavi
Marmara incident had hardly dried, when Turkish Prime
Minister Tayyip Erdogan hastened to condemn Israeli air
strikes on targets near Damascus, saying they were an opportunity for Syrian President Bashar al-Assads government to
cover up its own killings.
The air strike Israel carried out on Damascus is completely unacceptable. There is no rationale, no pretext that can
excuse this operation, Erdogan told a parliamentary meeting
of his ruling party. Using the Israel attack as an excuse,
[Assad] is trying to cover up the genocide in Banias, he said,
referring to the coastal town where anti-Assad activists said at
least 62 people were killed by government fighters.

Israeli officials said the air strikes on Friday and Sunday

were not intended to influence its neighbours civil war but
only at stopping Iranian missiles from reaching Lebanese
Hezbollah militants for possible use against the Jewish state.
Irans U.N. Ambassador Mohammad Khazaee complained
to the United Nations about the air strikes, describing them as
provocative and unwarranted attacks.
Residents and opposition sources said the Israeli warplanes
struck elite Syrian troops in the valley of the Barada River that
flows through Damascus and on Qasioun Mountain overlooking the capital. They said targets included air defences,
Republican Guards and a compound linked to chemical
weapons.

Kasoulides to visit U.N., meet Kerry

Foreign Minister Ioannis Kasoulides will be visiting the
United States this week as part of his international tour to
drum up support for Cyprus that finds itself in an economically
dire situation and vulnerable to pressure from international
lenders to push for a settlement of the islands division.
In New York, Kasoulides will meet with U.N. Secretary
General Ban Ki-Moon, from where he will depart for
Washington, D.C. where, on Friday he will meet with his
counterpart, Secretary of State John Kerry. Issues on the
agenda include the Cyprus problem, current developments in

the Middle East, as well as energy related matters. During his

visit, Kasoulides will also meet officials of the National Security
Council, Senators and members of Congress, members of the
Hellenic Caucus, Archbishop Demetrios, as well as with
representatives of the Cypriot Community.
The Foreign Ministers will conclude his trip with a keynote
speech at the Brookings Institute think tank on Geopolitics
in the Eastern Mediterranean: A Cypriot Perspective.
Press reports in Greece have suggested that Kasoulides may
also meet with U.S. Vice President Joe Biden.

Cyprus deepens
Israel ties at the
expense of Lebanon?
Things seem to have changed since the February 2012
visit by PM Netanyahu to Cyprus, when Israel sought to
replace its deteriorating ties with Ankara by
strengthening its relations with Nicosia, according to a
Beirut-based think tank.
In a comment following President Nicos Anstiades
visit to Cyprus, the Middle East Strategic Perspectives
said that the current rapprochement between Israel and
Turkey, which remains to be confirmed, offers an
additional gas export option to Israel, which seems to
have provoked some sort of nervousness among Cypriot
officials who have multiplied visits to Israel in recent
weeks. Bilateral meetings preceded the Presidents
official visit, focusing on energy and security issues.
Energy, Trade and Tourism Minister Giorgos Lakkotrypis
visited Israel on 08/04, followed by a visit by Defense
Minister Fotis Fotiou on 02/05. After meeting his Israeli
counterpart Moshe Yaalon, Fotiou announced that the
deepening of Cyprus defense relations with Israel poses
no threat to anyone and that similar cooperation with
other neighboring countries such as Greece, Lebanon or
Egypt is possible. Cyprus is now considering to allow the
Israeli Air Force to use its base in Paphos to patrol the
Eastern Mediterranean.
Although securing offshore oil and gas installations
and preventing terrorist attacks are the main reason
behind the increased military cooperation between
Nicosia and Tel Aviv, opening a Cypriot base to Israeli
fighter jets is likely to provoke unease among some of
Cyprus neighbours, including Lebanon. Added to the
recent statement by Irans IRGC commander Major
General Hossein Salami that Iran intends to stretch its
security border to the Eastern Mediterranean, the
region seems to be attracting more, not less, tension.

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May 8 - 14, 2013

4 | CYPRUS | financialmirror.com

Alexander Downers unproductive move

It is quite obvious, that when the Special Representative of
the UN Secretary-General, Mr. Alexander Downer met, as it was
reported, the so-called Foreign Minister and Prime Minister of
the illegal regime of the north, he was aiming at upgrading the
so-called Turkish-Cypriot state. Moreover, according to reports,
he tried to organise through the British Embassy, which pretends that it favours the reunion of Cyprus, the meeting of the
ambassadors of the five permanent members of the UN
Security Council in the occupied area! Time wise, these actions
coincide with the pressure exercised by Turkey for the start of
the negotiations and the meeting of the P5 in the occupied area
would have proved beneficial. Fortunately, the firm stand of the
Ambassadors of Russia and China, who did not attend the
meeting, strictly observing the UN resolutions and the terms of
reference of the good offices mission of the UN Secretary
General, averted this possibility. The French Ambassador went
to the meeting, but stated that it was regrettable the fact that
the British High Commissioner hosted the meeting in the
north, thus hindering the presence of the Russian and Chinese
Ambassadors.
These moves by Mr. Downer were highly unproductive, as
they created a negative climate and prompted the reaction
not only of the government, but also of the political parties
and the Church, which asked the withdrawal of Mr. Downer.
It is of interest to look into the legal aspects of Mr. Downers
misconduct within the framework of the good offices mis-

sion of the UN Secretary General.

The Security Council with two Resolutions, 244 (1967) of 22
December 1967 and 367 (1975) of 12 March 1975 invited the
parties to avail themselves of the good offices of the Secretary
General with a view to finding a solution to the Cyprus problem. It is according to Article 98 of the Charter providing that
the Secretary General shall perform such other functions as

By Dr Andrestinos
Papadopoulos
Ambassador a.h.
are entrusted to him by General Assembly, the Security
Council.. that the executive organ of the UN entrusted to
Ban Ki-moon and his predecessors the mission of good offices
to Cyprus.
Performing this duty, the Secretary General should act in
accordance with the purposes and principles of the Charter, the
norms of international law and the UN Resolutions. This view
was supported by former Secretary Generals Dag
Hammarskjold and U Thant, who regarded that strict compliance with the aims and principles of the Charter was sine qua
non of every exercise of good offices by the Secretary General.

More importantly, the International Court of Justice in the

Expenses Case - when the Court gave an opinion on
whether certain expenses have been validly authorised by a
series of General Assembly resolutions said that the validity of the United Nations actions should be tested in the light
of the Charters aims and distinguished international
lawyers, such as the late Professor Derek Bowett, take the
view that when the Secretary General acts under a specific
resolution it is his practice to consider it as biding terms or
reference.
These are, therefore, the terms of reference of the good
office mission of the UN Secretary General and his Special
Representative should act within this framework with due
respect of the UN resolutions. One wonders whether Mr.
Downer is not aware of Resolution 186 (1964) of 4th March
1964, which created UNFICYP, where there is a specific reference to the sovereign Republic of Cyprus, and more
importantly of Resolution 541 (1983) of 18th November
1983, which considers the Turkish Cypriot UDI as legally
invalid and calls for its withdrawal, while at the same time is
calling upon all states not to recognise any Cypriot State
other than the Republic of Cyprus.
In view of the above, any attempt to upgrade the so-called
Turkish Cypriot state through policies of equal distances
runs counter to the UN Resolutions, the Charter and the
decisions of the International Court of Justice.

Budget deficit fails to shrink in 2012

The budget deficit under the previous government came in
at EUR 1,127.3 mln, or 6.3% in 2012, the same percentage
recorded in 2011.
Overall revenue edged up by only 0.2% despite a 2 percentage point increase in VAT among other things, while overall
expenditure rose by 0.2% despite cuts implemented in late
2011.
The revenue performance was better in the fourth quarter
than for the whole of the year, however.
In the fourth quarter total revenue reached a preliminary
EUR 2,037.6 mln (EUR 2.0 bln), recording a 7.7% increase
compared with the corresponding period of 2011.
The main categories of revenue for the period OctoberDecember 2012 were as follows:
*Taxes on production and imports EUR 741.7 mln (8.7%
increase), of which VAT was EUR 415.5 mln (17.9% increase).
*Taxes on income and wealth EUR 558.2 mln (5.1%

decrease as compared to the same period of 2011).

*Revenue from sales of goods and services increased
by 17.9% compared with the corresponding period of the
previous year.
On the other hand, the fourth-quarter expenditure
performance, pushed up by unemployment, among
other things, was worse.
Total expenditure reached EUR 2,576.1 mln in the
fourth quarter, marking a 3.7% increase.
The main categories of expenditure for the period
October-December 2012 were as follows.
*Compensation of employees EUR 836.7 mln (3.8%
decrease)
*Social transfers EUR 777.0 mln (9.5% increase).
*Current transfers EUR 200.2 mln (compared to EUR 167.8
mln in the corresponding period of the previous year, or a
19.3% increase).

*Negative growth rates were observed in the categories of

subsidies (41.1%), capital formation (23.5%) and intermediate
consumption (5.4%).
The deficit in the fourth quarter was EUR 538.5mln, compared with EUR 592.4 mln deficit in the corresponding period
of the previous year.

May 8 - 14, 2013

financialmirror.com | CYPRUS | 5

Cyprus SMEs can turn to bonds

to bypass bank lending
By Shavasb Bohdjalian, Small-to-medium-sized enterpris- globe to maintain their expansionary policies has led to
es (SMEs) are best advised to follow the European trend of record interest for corporate bonds issued by SMEs with a
bypassing the banks in search of financing by issuing corpo- proven track record and activities in promising sectors as
rate bonds and then listing them on the Emerging investors search for a better return.
Since SMEs cannot afford the excessive fees charged by
Companies Market of the Cyprus Stock Exchange.
Despite massive injection of liquidity by the European the global investment banks, they can raise funds direct from
Central Bank (ECB), banks are reluctant to lend to business- the public through listing the bonds on a recognised stock
es across the EU as they rush to boost capital, lower risk and exchange such as Cyprus Stock Exchange, which has flexible
decrease their balance sheet size. But as the economy across listing rules and the listing fees are very reasonable and
the EU-27 weakens, and banks are not lending to cash- affordable even for really small companies.
A private company from any
starved SMEs who provide
jurisdiction can issue and list
employment for more than two
the bonds on the ECM Market of
thirds of the eurozone private
the CSE by utilsing the services
sector workers, more unemof an investment firm such as
ployment and stagnation loom.
CEO of Eurivex
Eurivex, which acts as the
The ECB is widely reported
Nominated Advisor guiding the
to be working on a plan to force
company to a successful listing.
banks receiving cheap financing
from the central bank to be conditional on onward lending to The whole listing process takes less than two weeks to comSMEs, possibly hooked on changes to its collateral rules - plete.
Once the bonds are listed, the Issuer will be able to maralthough its unlikely to be ready soon and based on the expeket the bonds directly to investors and raise funds to pay off
rience in the UK, nothing dramatic should be expected.
But if government and central bank plans to target SME expensive bank loans or finance future expansion and
lending all rely on banks as the middlemen, the problem growth. Companies can issue any type of bond fixed interpotentially festers, which is why many SMEs are sidestepping est, floating, zero coupon, convertible into shares and even
Performance Linked Notes, whereby the proceeds of the issue
the banks and going directly to investors.
Many corporations are now chasing the trillions of euros is invested in a particular asset and the Net Asset Value
sitting with European pension and insurance funds via tar- changes based on the performance of the underlying asset for
geted loan funds, bond issues and even direct business the benefit or loss of the investor.
The minimum listing value or size of the issue is EUR
financing.
With 80% of European corporate finance still coming from 200,000 but companies can issue bonds with flexible maturidirect bank lending as opposed to securities markets such as ty short or long term each with their own unique ISIN
corporate bonds or private loan placements - the U.S. ratio is (International Securities Identification Number). Once listed,
the opposite 20/80 - there is considerable scope to shift, the Issuer has regulatory permission to market the bonds to
investors in the EU-27 and beyond and thus reach its financaccording to a Reuters analysis.
Even in struggling Greece where loans are hard to find, ing targets at more affordable charges.
companies are taking advantage of investor demand for high
yield by issuing bonds and then listing the bonds on the
(Eurivex Ltd. is an EU investment firm, regulated by Cyprus
stock exchange.
Securities & Exchange Commission and approved by the
But if the bond market was only available for large and
mostly well known companies, the record low bank interest Cyprus Stock Exchange to act as Nominated Advisor for
rates combined by the pledge by central banks across the listings on the ECM Market of the Cyprus Stock Exchange)

By Shavasb Bohdjalian

Moscow agrees to renegotiate 2.5 bln loan

Finance Minister Harris Georgiades is expected to appeal to
the Russian government to renegotiate a 2.5 bln euro loan
secured under the previous administration in 2011.
Deputy government spokesman Victor Papadopoulos said
that around mid April, the Russian government approached the
Republic of Cyprus expressing the wish to change the terms of
the loan agreement, that has a 5-year maturity and carries an
interest of 4.5%.
Russia had earlier said that in order to renegotiate any terms,
it wanted Cyprus to conclude the bailout MoU with the Troika

(IMF, ECB, EC).

Now that the memorandum and the loan agreement have
been approved by parliament, we can proceed with the
renegotiation of the loan agreement with Russia, he added.
Cyprus wants to extend the loan repayment and lower the
interest to 2.5%. It will also ask for repayment of the loan in
instalments instead of a one-off payment.
The Cyprus government concluded in early April a 10 bln
euro bailout deal with the Troika with an interest rate of 2.5%
repayable over 12 years after a grace period of a decade.

30 mln to boost
8,000 jobs
The government plans to get 8,000 unemployed
people back in work, thanks to a 30.8 mln euro
programme that is primarily aimed at the tourist
sector.
Labour and Social Insurance Minister Zeta
Emilianidou announced a package of measures
aimed at combating unemployment that reached
14.2% in March, more than double what it was five
years ago.
Emilianidou said the projects are co-funded by the
EU and said will help all permanent European
residents, but said she hoped that more Cypriots
would be employed.
According to official statistics, the number of
registered unemployed in Cyprus reached 45,000 in
April, of whom 33,500 were Greek Cypriots.
Emilianidou noted that unemployment affects all
ages, but in particular young people.
We have too many young people out of work,
graduates and non-graduates, she said, adding that
more measures will be announced at a later stage.
The three measures include a 6.8 mln euro grant
to hire or keep 1,000 people on a flexible timetable
and work from home, 20 mln euros to employ 6,000
people in the hotel, food and tourism industry, and a
4 mln euro traineeship stagiaire programme for
1,000 unemployed graduates (under 35 years) to
gain work experience by subsidising them with 500
euros a month.
Cyprus recorded the second highest rise in EU
unemployment in March. According to Eurostat,
unemployment increased in 19 member states and
fell in eight, compared to March 2012.
The highest increases were recorded in Greece
(21.5% to 27.2% between January 2012 and January
2013), Cyprus (10.7% to 14.2%), Spain (24.1% to
26.7%) and Portugal (15.1% to 17.5%).

May 8 - 14, 2013

6 | OPINION | financialmirror.com

Govt should press BOCY to help SMEs

EDITORIAL
The government may be a bit upset at the slow pace of
events at the Bank of Cyprus, but it does not seem to be
pushing for a speedy return to normality, with thousands
of small businesses suffering from lack of money supply
in the market.
Across the continent, on a different island where, too,
its two biggest banks were bailed out five years ago, the
British government, politicians and the business community are pressing the 82%-taxpayer-owned Royal Bank of
Scotland not to conserve its cash and shrink its lending,
after the Bank of England extended the funding for lending scheme (FLS) to encourage the small business loan
market.
RBS already claims more than 40% of small and medium-sized business lending and with Lloyds, the other

state-owned bank, they dominate the scene, setting loan

criteria, charges and penalties.
RBS needs to make money to repay the government
bailout and this can only be done by lending. But it has also
adopted a more risk averse strategy, turning away risky
SMEs where borrowing has shrunk 3% year on year.
The second biggest mistake by the Central Bank of
Cyprus, after it blackmailed parliament to accept Laikis
resolution, which many sane economists have argued
against, was that it shut down the supply of cheap business
funding by closing the tap on all money supply. The delay
in introducing capital controls and the drip-pace of easing
these regulations means that the market has been drained
of any cash as depositors were terrorised into withdrawing
any amount they had at a rate of 300 euros a day.
The Central Bank Governor and the senior mandarins
are expendable. They are here today and gone tomorrow.
But if small businesses do not get access to affordable funding very soon, many enterprises that are competitive on the

national and international level will simply disappear,

never to be replaced by other Cypriot businesses.
Announcing half-measures to re-employ some 6,000
people in the tourism sector (many of whom are seasonal
and would have been called back by the hoteliers anyway)
may solve part of the problem. Subsidising the re-training
of young graduates also helps, but not the unemployed
over-30s.
With the EIB announcing some 100 mln euros in new
lending last week and the Eurogroup/ECB expected to give
the green light to 3 bln euros in aid money, these funds
should be pumped into the market immediately, either in
the form of emergency development projects or directly to
finance cheap loans to SMEs.
If these funds are not properly utilised, six months from
now we will back where we started, with 6,000 from the
tourist sector out of work, young graduates chasing a handful of new vacancies and the thousands of unemployed
remaining unassisted, at home with no pay.

The problem with poor countries GDP

Even in good financial times, development aid budgets are
hardly overflowing. Government leaders and donors must
make hard decisions about where to focus their limited
resources. How do you decide which countries should get
low-cost loans or cheaper vaccines, and which can afford to
fund their own development programs?
The answer depends, in part, on how we measure growth
and improvements in peoples lives. Traditionally, one of the
guiding factors has been per capita GDP the value of goods
and services produced by a country in a year divided by the
countrys population. Yet GDP may be an inaccurate indicator in the poorest countries, which is a concern not only for
policymakers or people like me who read lots of World Bank
reports, but also for anyone who wants to use statistics to
make the case for helping the worlds poorest people.
I have long believed that GDP understates growth even in
rich countries, where its measurement is quite sophisticated,
because it is very difficult to compare the value of baskets of
goods across different time periods. In the United States, for
example, a set of encyclopedias in 1960 was expensive but
held great value for families with studious kids. (I can speak
from experience, having spent many hours poring over the
multi-volume World Book Encyclopedia that my parents
bought for my sisters and me.) Now, thanks to the Internet,
kids have access to far more information for free. How do you
factor that into GDP?
The challenges of calculating GDP are particularly acute in
Sub-Saharan Africa, owing to weak national statistics offices
and historical biases that muddy crucial measurements.
Bothered by what he regarded as problems in Zambias
national statistics, Morten Jerven, an assistant professor at
Simon Fraser University, spent four years examining how

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African countries obtain their data and the challenges they

face in turning them into GDP estimates. His new book, Poor
Numbers: How We Are Misled by African Development
Statistics and What to Do about It, makes a strong case that a
lot of GDP measurements that we thought were accurate are
far from it.
Jerven notes that many African countries have trouble
measuring the size of their relatively large subsistence
economies and unrecorded economic activity. How do you

By Bill Gates

account for the production of a farmer who grows and eats his
own food? If subsistence farming is systematically underestimated, some of what looks like growth as an economy moves
out of subsistence may merely reflect a shift to something
that is easier to capture statistically.
There are other problems with poor countries GDP data.
For example, many countries in Sub-Saharan Africa do not
update their reporting often enough, so their GDP numbers
may miss large and fast-growing economic sectors, like cell
phones. When Ghana updated its reporting a few years ago,
its GDP jumped by 60%. But many people didnt understand
that this was just a statistical anomaly, not an actual change
in Ghanaians standard of living.
In addition, there are several ways to calculate GDP, and
they can produce wildly different results. Jerven mentions
three: the World Development Indicators, published by the
World Bank (by far the most commonly used dataset); the
Penn World Table, released by the University of Pennsylvania;
and the Maddison Project at the University of Groningen,
which is based on work by the late economist Angus
Maddison.
These sources rely on the same basic data, but they modify it in different ways to account for inflation and other factors. As a result, their rankings of different countries
economies can vary widely. Liberia is Sub-Saharan Africas
second-poorest, seventh-poorest, or 22nd-poorest country in
terms of GDP, depending on which authority you consult.
It is not only the relative rankings that differ. Sometimes,

COPYRIGHT

No part of the Financial Mirror

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

one source will show a country growing by several percentage

points, and another source will show it shrinking over the
same time period.
Jerven cites these discrepancies to argue that we cannot be
certain whether one poor countrys GDP is higher than
anothers, and that we should not use GDP alone to make
judgments about which economic policies lead to growth.
Does that mean that we really dont know anything about
what works (and what doesnt) in development?
Not at all. Researchers have long used techniques like periodic household surveys to collect data. For example, the
Demographic and Health Survey is conducted regularly to
determine things like childhood and maternal death rates.
Moreover, economists are using new techniques like satellite
mapping of light sources to inform their estimates of economic growth. Although such methods are not perfect, they
also are not susceptible to the same problems as GDP.
Other ways to measure overall living standards in a country are similarly imperfect; but they nonetheless provide additional ways to understand poverty. One, called the Human
Development Index, uses health and education statistics in
addition to GDP. Another, the Multidimensional Poverty
Index, uses ten indicators, including nutrition, sanitation, and
access to cooking fuel and water. And, by using purchasing
power parity, which measures the cost of the same basket of
goods and services in different countries, economists can
adjust GDP to gain better insight into living standards.
Yet it is clear to me that we need to devote greater
resources to getting basic GDP numbers right. As Jerven
argues, national statistics offices across Africa need more support so that they can obtain and report timelier and more
accurate data. Donor governments and international organizations such as the World Bank need to do more to help
African authorities produce a clearer picture of their
economies. And African policymakers need to be more consistent about demanding better statistics and using them to
inform decisions.
Im a big advocate for investing in health and development
around the world. The better tools we have for measuring
progress, the more we can ensure that those investments
reach the people who need them the most.
Bill Gates is Co-Chair of the
Bill & Melinda Gates Foundation.
Project Syndicate, 2013.
www.project-syndicate.org

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May 8 - 14, 2013

financialmirror.com | COMMENT | 7

Should Germany exit the Euro?

Last summer, the financier George Soros urged Germany to
agree to the establishment of the European Stability
Mechanism, calling on the country to lead or leave. Now he
says that Germany should exit the euro if it continues to block
the introduction of Eurobonds.
Soros is playing with fire. Leaving the eurozone is precisely
what the newly founded Alternative for Germany party, which
draws support from a wide swath of society, is demanding.
Crunch time is fast approaching. Cyprus is almost out of the
euro, its banks collapse having been delayed by the European
Central Banks provision of Emergency Liquidity Assistance,
while euroskeptic parties led by Beppe Grillo and Silvio
Berlusconi garnered a combined total of 55% of the popular vote
in the latest Italian general election.
Moreover, the Greeks and Spaniards are unlikely to be able to
bear the strain of economic austerity much longer, with youth
unemployment inching toward 60%. The independence movement in Catalonia has gathered so much momentum that a
leading Spanish general has vowed to send troops into
Barcelona should the province hold a referendum on secession.
France, too, has competitiveness problems, and is unable to
meet its commitments under the European Unions Fiscal
Compact. Portugal needs a new rescue program, and Slovenia
could soon be asking for a rescue as well.
Many investors echo Soros. They want to cut and run to
unload their toxic paper onto intergovernmental rescuers, who
should pay for it with the proceeds of Eurobond sales, and put
their money in safer havens. The public already is being misused
in an effort to mop up junk securities and support feeble banks,
with taxpayer-funded institutions such as the ECB and the
bailout programs having by now provided 1.2 trillion ($1.6 trillion) in international credit.
If Soros were right, and Germany had to choose between
Eurobonds and the euro, many Germans would surely prefer to
leave the euro. The new German political party would attract

much more support, and sentiment might shift. The euro itself
would be finished; after all, its primary task was to break the
Bundesbanks dominance in monetary policy.
But Soros is wrong. For starters, there is no legal basis for his
demand. Article 125 of the Treaty on the Functioning of the
European Union expressly forbids the mutualisation of debt.

By Hans-Werner Sinn
Worst of all, Soros does not recognize the real nature of the
eurozones problems. The ongoing financial crisis is merely a
symptom of the monetary unions underlying malady: its southern members loss of competitiveness.
The euro gave these countries access to cheap credit, which
was used to finance wage increases that were not underpinned
by productivity gains. This led to a price explosion and massive
external deficits.
Maintaining these countries excessive prices and nominal
incomes with artificially cheap credit guaranteed by other countries would only make the loss of competitiveness permanent.
The entrenchment of debtor-creditor relationships between the
states of the eurozone would fuel political tension as occurred
in the United States in its first decades.
In order to regain competitiveness, the southern countries
will have to reduce their goods prices, while the northern countries will have to accept higher inflation. Eurobonds, however,
would impede precisely this outcome, because relative prices in
the north can be raised only when northern savers invest their
capital at home instead of seeing it publicly escorted to the south
by taxpayer-financed credit guarantees.

According to a study by Goldman Sachs, countries like

Greece, Portugal, and Spain will have to become 20-30% cheaper, and German prices will have to rise by 20% relative to the
eurozone average. To be sure, if Germany were to leave the common currency, the road back to competitiveness would be easier for the southern countries, since the rump euro would undergo devaluation; but the crisis countries fundamental problem
would remain as long as the other competitive countries remain
in the eurozone. Spain, for example, would still have to cut its
prices by 22-24% relative to the new eurozone average.
From this perspective, the crisis countries would not be
spared painful retrenchment as long as they remained in a monetary union that includes competitive countries. The only way
to avoid it would be for them to exit the euro and devalue their
new currencies. But, so far, they have not been willing to go this
route.
Politically, it would be a big mistake for Germany to exit the
euro, because that would reinstate the Rhine as the border
between France and Germany. Franco-German reconciliation,
the greatest success of the postwar period in Europe, would be
in jeopardy.
Thus, the only remaining option, as unpleasant as it may be
for some countries, is to tighten budget constraints in the eurozone. After years of easy money, a way back to reality must be
found. If a country is bankrupt, it must let its creditors know
that it cannot repay its debts. And speculators must take responsibility for their decisions, and stop clamoring for taxpayer
money whenever their investments turn bad.
Hans-Werner Sinn is Professor of Economics
and Public Finance, University of Munich,
and President of the Ifo Institute.
Project Syndicate, 2013.
www.project-syndicate.org

May 8 - 14, 2013

8 | COMMENT | financialmirror.com

A fateful mistake
Controversy is essential to the advancement of science. So
the debunking of methodological flaws and a coding error in
a paper by the economists Carmen Reinhart and Kenneth
Rogoff is just part of everyday life in academia. Yet coverage
of the controversy by the news media and the blogosphere
has been astonishingly intense and simplistic.
Growth in a Time of Debt, the short 2010 paper in
which Reinhart and Rogoff claimed that public debt starts to
have a significantly detrimental effect on economic growth
once it reaches 90% of GDP, was never a celebrated piece of
economic research. As a rough empirical characterization of
stylized facts, it was received somewhat skeptically by the
academic community, and both authors were known for
much more noted contributions. Google Scholar, the academic search engine, records more than 3,000 academic citations of Rogoffs most cited paper, compared to less than 500
for Growth in a Time of Debt.
What would have normally remained a subject for postseminar small talk has, however, become a topic for discussion by journalists, commentators, and policymakers. For all
of them, what matters is that the sorry fate of the
Reinhart/Rogoff paper undermines the case for fiscal austerity.
A few months ago, Olivier Blanchard, the International
Monetary Funds chief economist, had already criticized his
colleagues and policymakers in advanced countries for systematically underestimating the recessionary impact of fiscal
consolidation programs. The debacle of the Reinhart/Rogoff
paper is widely regarded as another, fatal illustration of austeritys shaky intellectual foundations.
But this is only partly true. Until the Reinhart/Rogoff
paper, the main argument for fiscal retrenchment rested on
concerns about the sustainability of public debt. The question was whether a sovereign would ultimately be able to
repay its debt, given specific economic and financial conditions, long-term trends such as the aging of the population,
and uncertainty about the future course of policy.

The problem was that economists were unable to say how

much is too much. There was no given threshold below
which debt was innocuous and above which it was dangerous. So the message to policymakers was confusing.
Economists were like doctors telling patients that, while
some wine may be beneficial, too much is certainly dangerous without being able to tell them how many glasses per
day they were allowed. They were right, but hopelessly
imprecise.

By Jean Pisani-Ferry
Confusion was especially acute in early 2010, when
Growth in a Time of Debt was published. The global economy was just emerging from the deepest recession in the
post-World War II period. A global Keynesian stimulus had
prevented the worst, and the most urgent policy question
was whether to continue supporting the economy or start
consolidating.
Some argued in favor of delaying consolidation, because
the economy was still in a deep recession; too harsh an
adjustment, according to this view, would have a major
impact on a still-weak private economy. Some claimed the
opposite, arguing that, given the scale of the task, there was
no time to lose.
The Reinhart/Rogoff paper appeared to provide the perfect
argument in support of rapid consolidation, which is why it
was cited intensively in policy discussions. Austerity, it was
argued, was needed to stem the rise in the debt ratio and
safeguard long-term growth.
To be sure, retrenchment could entail some short-term
costs; but the longer-term benefits would be much bigger.

Even though Reinhart and Rogoff themselves did not draw

that conclusion explicitly in their paper, many drew it for
them. It was so tempting for a minister or a senior technocrat to explain that consolidation had to start immediately,
because the 90% threshold was approaching, that most of
them did not resist it.
Heavy reliance on what turns out to be disputed evidence
now leaves the fiscal hawks in a weak position, to say the
least, vis--vis their opponents. This is especially true in
Europe. Having promised that rapid consolidation would be
good for growth, and having delivered recession, the
European Union has disappointed its citizens. Adjustment
fatigue is setting in, and governments risk losing support if
they go much further in their consolidation efforts.
The danger is that the discrediting of hasty austerity could
undermine the case for fiscal responsibility in the long run.
If so, financial markets could conclude that public-debt sustainability is in serious danger a perception that could have
highly adverse effects on financing conditions. In the end,
growth would indeed suffer, ironically proving Reinhart and
Rogoff right.
This episode once again underscores the importance of
intellectual rigor. Of course, that is not always an easy credo
by which to abide. Researchers are tempted by persuasive
results that can attract the interest of policymakers, who are
tempted by a selective reading of the evidence that can provide them with ammunition in domestic and international
debate. Submitting to either temptation, as the
Reinhart/Rogoff episode has shown, is never advisable.
Jean Pisani-Ferry is Professor of Economics at Universit
Paris-Dauphine and currently serves as Director of Economic
Policy Planning for the Prime Minister of France.
The views expressed here are his own.
Project Syndicate, 2013.
www.project-syndicate.org

Whos afraid of the Big Bad Debt?

It has been a while since a debate among academic economists attracted so much interest from the mainstream press
as has the row between Carmen Reinhart and Kenneth
Rogoff, on one side, and Paul Krugman, on the other. In fact,
it has even become fodder for television comedy shows.
At issue is an influential 2010 paper by Rogoff and Reinhart
that purports to show that high levels of public debt are associated with lower long-term economic growth. A new paper
by Thomas Herndon, a graduate student at the University of
Massachusetts at Amherst, and two of his professors, Michael
Ash and Robert Pollin, questioned this finding, and Krugman
made their work famous.
Herndon, Ash, and Pollin argue that the results obtained
by Reinhart and Rogoff are based on coding errors and questionable methodological choices. But, after all their quibbles,
their paper weakens but does not refute the Reinhart/Rogoff
papers main result. So why all the fuss?
The debate is considered important because it is supposed
to have implications for the choice between cutting the deficit
and stimulating the economy now. But this is just not so.
Instead, the paper needs to be understood in the context of
the debate between Keynesians and (as Krugman calls them)
Austerians those who propose fiscal austerity to stem spiraling government debt.
The Keynesian prescription is simple: If the economy is
weak, fiscal policy should be used to stimulate it; if it is overheating, spending cuts or tax hikes should be used to cool it
down. Public-debt levels will rise and fall, but policymakers
should not pay too much attention. After all, look at the
United States and the United Kingdom: despite high deficits
and rising debt, inflation remains subdued and long-term
interest rates are at historic lows. Why not use this opportunity to stimulate the economy and invest in its future?
Interestingly, Reinhart and Rogoff broadly agree with this
recommendation (at least for the US), and they even support
heterodox policies such as writing down mortgages and targeting a higher inflation rate. But their paper is really about a
different subject. It is about the long-term effects of high levels of public debt, which they argue are deleterious to growth.
That conclusion implies that Krugman is wrong to claim
that one can be blas about the debt level. Krugman would

argue that, if the economy remains weak, interest rates will

remain low, despite high and rising public debt. Fear of a
speculative attack by so-called bond vigilantes is unwarranted, he would claim, as the US and the UK show.
The Reinhart/Rogoff paper provides worldwide evidence in
favor of the view that high public debt can become a problem,
and that countries should beware of putting themselves in a
vulnerable position. But the ensuing debate sheds no light on
the question of whether policymakers should disregard debt

By Ricardo Hausmann
levels when their economies are depressed, as Krugman recommends. There really is a big bad debt wolf, and the world is
full of examples in which it has emerged from its lair to create havoc.
Consider Spain. When the 2008 crisis erupted, the G-20
convened that November to coordinate a Keynesian response.
All member countries were supposed to fight the coming
recession by stimulating their economies through simultaneous fiscal expansion. Pedro Solbes, Spains finance minister at
the time, quickly ordered an acceleration of public investment
and spending.
By the spring of 2009, however, Solbes was forced to
reverse course. With tax revenue collapsing and expenditure
ballooning, the government found itself running such large
deficits that the markets were spooked government-bond
prices collapsed, interest rates soared, and the country found
itself unable to finance its deficit. Where were the rock-bottom
interest rates that are supposed to characterize periods of
weak growth and high unemployment?
Financial history is full of similar examples: Mexico in
1994, Russia in 1998, Ecuador in 1999, Argentina in 2001,
Uruguay in 2002, the Dominican Republic in 2003, and even
the UK in 1976. All were battling recession and high unemployment, only to find themselves unable to finance their

deficits. In fact, when a country is in this predicament, fiscal

contraction may end up being expansionary to the extent that
it reestablishes financial confidence and lowers sky-high interest rates.
As much as Krugman has made of the Reinhart/Rogoff
paper, the debate between Austerians and Keynesians has
limited relevance outside of the US. Krugman does not mention issues that he knows are central to fiscal choices.
The level of debt does matter, and its currency composition
matters even more. The US is in the enviable position of issuing debt in its own currency. The Federal Reserve can create
as many dollars as it sees fit in order to buy government debt.
Moreover, as the worlds reserve currency, the dollar plays a
very particular role in the global economy.
Japan, too, can finance its deficits, despite astronomical
public debt, because it borrows in yen and overwhelmingly
from Japanese institutional investors.
By contrast, Spains debt is in euros, a currency that it cannot print, and is held mostly by foreigners. And many emerging-market countries are in a similar position. In a recent
paper with Ugo Panizza of the Graduate Institute of
Development Studies in Geneva, we show that in the aftermath of the 2008 crisis, emerging-market countries that
could run the kind of counter-cyclical Keynesian policies
espoused by Krugman had low levels of foreign-currency debt.
It is only because they were Austerians before the crisis that
they could afford to be Keynesians afterwards.
Whatever weaknesses one finds in the Reinhart/Rogoff
paper, it does not follow that countries in recession should
always disregard deficits and debt levels and focus on stimulus. That might be the right recommendation for the US
today, but as a universal rule of thumb, it is just plain wrong.
Ricardo Hausmann, a former Minister of Planning
of Venezuela and Chief Economist of the Inter-American
Development Bank, is a professor of economics
and director of the Center for International Development
at Harvard University.
Project Syndicate, 2013.
www.project-syndicate.org

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May 8 - 14, 2013

financialmirror.com | WORLD MARKETS | 17

Chinas self-imposed revolution

Marcuards Market update
by GaveKal Research
Are Chinas leaders efficient technocrats who can rule without the messy impediments of democracy, or hapless bureaucrats ensconced in a corrupt system they cannot change? Many
foreign admirers prefer the former picture, but within China the
corrupt-bureaucrats image is ever more widely held. Former
Premier Wen Jiabao stoked popular cynicism by repeatedly making grand, sweeping statements about the urgency of economic and political reform, and then delivering modest incremental
change at best. Now his former deputy Li Keqiang is running
the show. Will he continue Wens sorry record, or improve the
walk-to-talk ratio? The signs suggest that Li will be a far more
aggressive reformer than his mentor.
On Monday, Li ran a meeting of Chinas State Council which
resulted in a published agenda for economic policy change that
goes far beyond Wen-era platitudes in its boldness and specificity. The two most notable measures are the following:
- The government will this year publish an operational
plan for capital-account liberalization, including the creation
of a system allowing Chinese domestic investors to invest
abroad. In the past, Chinese officials have talked vaguely about
opening cross-border capital flows eventually. The new language
implies specific plans to gradually prise open the capital account
beginning within a year or two.
- The government will speed urban income and consumption growth by setting up a new and more flexible residence permit system, which will eventually displace the much-maligned
household registration system (hukou) as a mechanism for
Chinese citizens access to social services and public benefits.
The two-tier hukou system discourages social mobility and
income growth, by entrenching divisions between urban and

rural residents and inhibiting migration to urban

areas. (Related to this, the State Council should issue
a national urbanization strategy by mid-year; this
will not be yet another investment stimulus plan for local governments, but an attempt to ensure stronger household income
and consumption growth:
Other interesting items on the State Councils agenda
include: budget reforms to control the accumulation of local
government debt; reform of utility prices paid by consumers;
and an overhaul of the public hospital system. But perhaps the
most important one to watch is what Li has chosen as his signature initiative: a push for deregulation, aimed at cutting the
endless government approvals required for Chinese companies
to make investments or conduct routine business operations.
Given the enormous reach and highly interventionist character
of Chinas government regulation, the potential productivity
gains here are substantialLi himself has called it a selfimposed revolution.
The risk to this idealistic deregulatory plan has always been
that it gets bogged down in lower levels of the bureaucracy that
are unwilling to give up power. To his credit, Li has enforced the

delivery of regular, quantitative progress on his promise to cut

1,700 line items of government approval by a third. The State
Council had already approved the elimination of 71 of these, and
came up with another 62 to pass at the latest meeting.
Li himself proclaims he wants to be judged on deeds, not
words: on taking office in March he commented on national TV:
in advancing reform the important thing is to take action; talking the talk is not as good as walking the walk. With the structural problems in Chinas economy mounting, the country cannot afford another all-talk, no-walk leadership. Yet a crash program of liberalization shock therapy has never seemed a likely prospectthe divisions among Chinas different leaders and
interest groups mean that reform can only advance through bargaining and compromise. But fortunately, Li is now taking steps
to turn the new leaderships early and laudable rhetoric on economic reform into action. If he keeps this up, we may have to
get accustomed to the novel spectacle of China actually walking
the walk of reform.

Labour vs. Capital, after the crisis

Few of us at Marcuard spent the May Day holiday thronging
the streets shouting socialist slogans. This will not surprise
many of our readers. But what may surprise is our growing concern about labors precipitous loss of income share to capital.
One concern lies simply in aggregate demand. As the OECD
pointed out in a paper last year, people with less wealth tend to
consume a greater share of their income. As real incomes for
labor stagnate or decline, a nations consumption power
weakens. This sluggish growth in consumption makes it all the
harder for OECD nations to resume robust economic growth.
And indeed, wherever we look in the rich world we see confirmation of this economic reality. Unemployment remains high
or is worsening in many European nations, and is receding at a
painfully slow rate in the US. Global growth may be flagging yet
again, with the latest batches of data raising the prospect of a
fourth straight spring-time soft patch.
So it is no surprise that companies are seeing lackluster
topline growth. Take the US. The 72% of S&P 500 companies
that have reported in the 1Q13 earnings season saw revenues fall
by an average 1.8% YoY. Yet EPS growth has expanded by an
average 2.5%, thanks to margin expansion and capital management. Dividends are expanding and companies are taking
advantage of cheap money to further enhance earnings per
share through buybacks (e.g., Apple). As a result shareholders
(i.e., capital) are not doing badly at all.
The strong performance of the S&P 500 despite lackluster
real median income growth is another reminder that since the
2008 crisis, the wealth gap has widened, not narrowed.
Aggressive monetary policy has driven up asset pricesdisproportionately benefiting upper-income households with lots of
Weekly Economic Calendar
Date

Country

Detail

MAY 8
EUR German Industrial Production M/M due 1.00pm
MAY 8
CAD Housing Starts due 3.15pm
MAY 8
US
10-year Bond Auction due 8.00pm
MAY 9
NZD Unemployment Rate & Employment Change due 1.45am
MAY 9
EUR German, French and Swiss bank holiday
MAY 9
GBP Manufacturing Production M/M due 11.30am
MAY 9
GBP Industrial Production M/M due 11.30am
MAY 9
GBP Bank of England MPC meeting on interest rates due 2.00pm
MAY 9
EUR Spanish 10-year bond auction
MAY 8
US
Weekly Unemployment Claims due 3.30pm
MAY 9
US
Wholesale Inventories M/M due 5.00pm
MAY 10
EUR German Trade Balance due 9.00am
MAY 10
GBP Trade Balance in GBP due 11.30am
MAY 10
ALL G7 Meetings - Day 1
MAY 10
CAD Employment Change due 3.30pm
MAY 10
US
Fed Chairman Ben Bernanke speaks starting 4.30pm
MAY 10
US
Federal Budget Balance due 9.00pm
Indicated times are Cyprus time

Forecast

Previous

-0.10%
175k
1.10%

0.50%
181k
1.8/2.8
-1.00%

0.40%
0.30%
0.50%

0.80%
1.00%
0.50%

333k
0.30%
18.1B
-8.9B

324k
-0.30%
17.1B
-9.4B

13.5k

-54.5k

93.9B
-106.5B
Source: Eurivex

capital at their disposalbut so far not triggered a broader

revival in employment and consumption. Japan is the latest to
join this game: since its monetary policy turned aggressive last
November the stock market is up 45% in local currency terms,
but average wages have stayed flat.
For the moment the OECD economies and their companies
seem to be survivingthe social compact has not crumbled,
and firms continue to improve profitability. But the situation
cannot last forever: eventually electorates will despair at low
income growth and demand more radical change, and eventually companies will run out of room to boost EPS through buybacks, because their equity capital will be cut to the bone.
How do we get out of this situation? There is no clean
answer. Quantitative easing advocates argue that we simply
need to do more QE for longer, and everything will work out.

The evidence for this so far is meager, since the apparent impact
of QE is to widen inequality by boosting asset prices while doing
little for structural unemployment (the counterargument of
course is that without QE the employment situation would be
far worse).
At the other end of the spectrum, the argument for an end
to QE, a rise in interest rates and a consequent likely economic
restructuring through massive bankruptcies are logically consistent but politically impractical. Moreover, it ignores the fact that
the declining labor share of income is a decades-long phenomenon with many deep sourcescapital efficiency, technology,
globalization, the increased economic weight of the
educated/highly skilled. In addition, demographic factors will
depress structural economic growth rates in coming decades.
Any way you slice it, its difficult to see a solution to the current
economic mess that will make both labor and capital happy.

www.marcuardheritage.com

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.

French industry output falls in March

French industrial output fell by a worse-than-expected 0.9%
in March due to lower production in the farm and transport
sectors and a sharp drop in refining activity, data showed on
Tuesday. The monthly fall, in part an adjustment from a 0.8%
rebound in February driven by the restarting of a refinery, was
worse than the 0.3% dip predicted by economists in a Reuters
poll. Output over the first quarter in the moribund industrial
sector which makes up about 12% of Frances economy
was down 0.4% compared with the previous quarter.
President Francois Hollande is struggling, a year into his
term, to fulfil a campaign pledge to pull the industrial sector

out of a long slump that is driving a steady stream of layoffs.

His government said this week that measures taken so far to
boost competitiveness would take time to bear fruit.
Manufacturing output, a measure that excludes water, energy and mining, was down 1.0% in March after a 0.8% rise the
previous month, the data from the INSEE statistics office
showed.
Separately, customs data showed that the March trade
deficit, another gauge of Frances flagging competitiveness,
narrowed to 4.696 bln euros from 5.645 bln in February
thanks to deliveries of Airbus planes and a cruise liner.

May 8 - 14, 2013

18 | WORLD MARKETS | financialmirror.com

U.S. needs to remain focused on job creation

and businesses who have been deterred from Europe by the
continents ongoing debt crises. The US labour market gains
stand in direct contrast to a report, also published on Friday,
that the euro-area economy will shrink in 2013 more than was
previously estimated with high unemployment levels.
However, when you look for the details behind the impressive US headlines, another side to the story becomes apparent.
Construction employment fell and manufacturing payrolls
remained flat. These are two sectors with a very notable influence on the economy, future infrastructures and development.
In addition, average weekly earnings and aggregate hours are
down, which could have a long-term impact on consumer
spending power.
The reality is that the labour market, while showing overall
improvements, is still uncertain and uneven. It is these details,
this multi-layered reality that causes the fluctuations we see in
the trading markets after the release of key reports. Investors
respond to the initial headlines, and only afterwards, take in the
bigger picture. As the market corrects itself, there is typically a
fluctuation of close peaks and troughs. That would explain why
on Friday, after the Dow Jones reached its highest in history, it
then dropped slightly, but still closed the day at 142.38 points
higher at 14,973.96. Traders of short-term options can profit
from both the market reaction and correction, while longer-term
investors need to wary of acting before any market correction.
Either way, if you are still reading at the bottom of this article, youll do well to apply the same approach when investing:
always look past the headlines.

By Oren Laurent
President, Banc De Binary

Economics is rarely a black and white story. While it may be

expedient and profitable to simplify matters, trading up or down
on various assets, the complex reality for economists is that
data releases and the financial markets often reveal a multi-layered picture. Consider for example the NFP employment figures released in the US on Friday, one of the key monthly indicators of US economic health.
The figures seem to suggest that all is rosy, and the markets
certainly responded accordingly in the immediate aftermath.
The payrolls showed that 165,000 jobs were created last month,
significantly higher than the number of 145,000 which was predicted by economists. This means that the unemployment rate
now stands at 7.5%, the lowest level in four years. Businesses
that suffered and fired employees in the recession are now
enjoying higher revenues and
are in a position to hire again.
Alan Krueger, chairman of
the Obama administrations
Council of Economic Advisers,
was quick to attribute the rise in
employment to successful political strategy, it is critical that
we remain focused on pursuing
policies to speed job creation
and expand the middle class.
At first glance, the NFP figures serve to indicate that the
US economy and job market are
stronger than investors had
Alan Krueger

previously thought. Indeed, following the news, US stocks

surged and the Dow Jones index rose above 15,000 for the very
first time in its history.
The news is particular welcome to international investors

www.bbinary.com

Aussie slides to 2-month low after RBA cut, euro tripped by ECB
The Australian dollar slumped to a twomonth trough on Tuesday after the Reserve
Bank of Australia cut rates to a record low,
while the euro remained capped as the common currency was unable to shake off dovish
comments from the European Central Bank
chief.
The yen bounced back from a 10-day low
versus the dollar on Japanese exporters buying
after a long weekend in Japan, though many
traders expect the currency to stay under pressure after a solid U.S. job report last week.
The big mover was the Australian dollar,
which fell 0.7% to $1.0181 after RBA cut rates
by a quarter of a percentage point to 2.75% citing a historically high Aussie dollar. The market had been evenly divided on the chance of
policy easing on Tuesday. The Aussie broke
through a support around $1.0220 and fell as
to $1.0178, its lowest since March 4. The low

that day of $1.0116 is seen as an important

support.
The common currency was at $1.3084, little changed on the day after having pulled back
from Mondays high of $1.3141. It fell as far as
$1.3053 after the head of the European Central
Bank (ECB) reiterated the central banks readi-

been the only bank that is not expanding its

balance sheet. But It will likely consider such a
step, a trader told.
Initial support for the euro is seen around
$1.3024, the 76.4% retracement of its April 24May 1 rally and the 55-day moving average at
$1.3021. Vassili Serebriakov, strategist at BNP

FOREX COMMENTARY & TECHNICAL ANALYSIS

ness to cut interest rates again if needed. In a
speech in Rome, ECB President Mario Draghi
said the bank would monitor incoming data
closely and be ready to cut rates further,
including the deposit rate currently at zero.
For southern European countries, a euro
above $1.30 would be too high for their economy. Among major central banks, the ECB has

Paribas, said further downside risks for the

euro are likely to be limited thanks to ongoing
significant support from European market
sentiment. Both European financial equities
and the core-periphery spreads have been
moving in a favourable direction and indicate

that EUR/USD can potentially strengthen to

the 1.34-1.35 area.
The common currency also ceded a bit of
ground against the yen, slipping to 129.72
from Mondays session high of 130.40 and off
a 3-year high of 131.10 set last month. The
pullback in the euro saw the dollar index drift
up to 82.244 from Mondays low of 81.982,
helping keep it well away from last weeks 2month trough of 81.331. The dollar slipped
0.2% to 99.11 yen, after having risen as high as
99.455 on Monday on the back of the upbeat
U.S. jobs data last Friday.
Still, many market players think the currency is gearing up for another go at tough resistance at the 100 level, which it has failed twice
to pierce last month even as the Japanese currency came under constant pressure from the
Bank of Japans aggressive monetary easing
last month.

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.

May 8 - 14, 2013

WORLD MARKETS | 19

financialmirror.com |

Alwaleeds Kingdom plans hotel sale

l On

prowl for acquisitions, says no rush for Twitter to go public

Saudi billionaire Prince Alwaleed bin Talal will hold onto

his most high-profile investments, which range from stakes
in Citigroup and News Corp to microblogging site Twitter,
while seeking out new targets to diversify his global portfolio.
Kingdom Holding, Alwaleeds investment vehicle, has
asked investment banks to identify possible acquisition targets around the world and plans to sell its stake in 20-30
hotels in the next two years.
We have talked with certain investment banks to look at
opportunities that we may have not seen in our region. This
is in motion right now, said Alwaleed, who owns 95% of
Kingdom.
We intentionally try to be diversified by location and by
industry so we wont have much concentration in one
arena.
Kingdom Holding, which went public in 2007, has a market value of around $17 bln, making it one of the largest listed investment firms in the Middle East.
Alwaleed, a nephew of King Abdullah, has also moved to
divest some of his investments in real estate and hotels in
recent months, and said he plans to sell 20-30 more hotels in
Africa, the Middle East and Asia in the next two years.
Kingdom owns stock in hotel ownership and management companies such as Movenpick, Fairmont, Raffles and
Four Seasons, which Alwaleed said he would not sell. It also
has direct stakes in specific hotels run by these companies.
Kingdom has been selling such stock in recent months. It
booked a $32.9 mln gain from sale of some equity in New
Yorks Plaza hotel in December, retaining 25%.
However, despite these plans, he said Kingdom would

retain a stake in major hotel companies and in landmark

assets.
Hotels that we as Kingdom Holding directly own such as
the Plaza Hotel in New York, the Savoy in London, the Four
Seasons in Toronto and George V in Paris, these are the
anchor ones that are not for sale, he said.
He has made investments in Monacos Monte Carlo Grand
Hotel and currently holds a 10% stake in Euro Disney SCA.
In August 2011, Al Waleed announced plans to build the
next tallest building in the World, the Kingdom Tower at a
height of at least 1,000 metres.
Kingdom Holding first-quarter net profit rose 9% year-onyear, but the companys share price has dropped 18% since
the start of 2013.
Alwaleed said he thought the share price was just taking
a breather after being one of the strongest performing
stocks in Saudi Arabias all-share index last year.

HIGH-PROFILE INVESTMENTS

Alwaleed said Kingdom would retain its holding in major

investments including Citigroup, News Corp, Twitter and its
most recent acquisition, the Chinese online retailer 360buy
Jingdong.
Kingdom owns 2% of Citi and 7% of voting shares in
Rupert Murdochs News Corp. It has invested $300 mln in
Twitter and $160 mln in 360buy.
He said he did not anticipate Twitter would launch an IPO
soon and should draw lessons from Facebooks disappointing
launch last year.
Theres no rush for Twitter to go public. We never push

them to go public fast. The issue is when will Twitter be

ready to go public? he said.
Citigroup posted a 30% increase in first-quarter net profit
in April, beating analysts forecasts as the No.3 U.S. bank generated more money from underwriting stock issues and
advising companies on mergers.
The stock has risen 18.8% year-to-date and surged nearly
45% in the last one year.
He also said he had not yet decided whether to retain
stock in both the entertainment and publishing wings of
News Corp after the company carries out plans to split its television and film assets from its newspapers this summer.
However, he said it would make sense for the media company to try to buy out other investors in British satellite
channel BSkyB once the fallout from the scandal of phone
hacking at the News of the World unit fades into the background.

RBS pushes for sale of UK govt stake

l

Sale of shares could start in mid-2014; Taxpayer to make profit in long run

State-backed Royal Bank of Scotland on Friday pushed for

the British government to start selling its 82% stake as early as
next year even though it could mean a loss for taxpayers.
Chairman Philip Hampton said the aim was to have a business in strong enough shape to start preparing a prospectus
with the government for a sale from the middle of 2014.
It could be earlier, thats a matter for the government,
Hampton said in an interview on the banks website.
Britain pumped 45.5 bln pounds into RBS during the 2008
financial crisis, leaving the government with a controlling
stake.
The bank has been through a big restructuring - shedding
underperforming assets and cutting jobs. It reported its first
quarterly profit in 18 months on Friday. But taxpayers are still
sitting on a paper loss of 19 bln pounds, based on RBSs current share price.
The government is keen to start selling its holding but is
under pressure to get a good deal for taxpayers ahead of a general election in 2015.

RBS is pushing for a sale so it can run its business without

state interference. Hampton has said the bank needed freedom
to execute its recovery plan without political meddling.
But rival Lloyds Banking Group, 39% state-owned after a
bailout in the crisis, could prove a more attractive business to
sell. Lloyds reported a big jump in first quarter profit last week,
pushing its shares close to a price where the government could
break even if it sold out.
Other factors affecting the governments decision to sell
included the outcome of talks on capital requirements between
the banks and Britains new financial regulator and a review
into banking standards by a parliamentary panel.

SELL AT A LOSS

RBS Chief Executive Stephen Hester said the government

might have to take a loss initially when it starts selling, given
the depressed state of bank shares and tougher regulation of the
industry. But he expected the UK taxpayer to make a profit in
the long run.

Customer numbers leap at Metro Bank

Metro Bank, which launched in 2010 as Britains first new
high street lender for more than a century, saw customer numbers surge in 2012, benefiting from the unpopularity of the established banks.
Metro, which operates 17 branches in London and the south
east of England, said that customer accounts rose by 183% to
136,000 at the end of the year, with numbers increasing by a further 25% in the first quarter of 2013.
Customer deposits nearly trebled to 576 mln pounds, echoing
the rate of growth in its loan book, which stood at 168 mln
pounds at the end of 2012.
Challengers such as Metro Bank, Virgin Money and Aldermore
have looked to pick up customers either unhappy with the service provided by bigger banks or those who have been shunned by
established lenders as they shrink balance sheets and build up
capital reserves to meet new regulations. Britains Big Five Lloyds, RBS, Barclays, HSBC and Santander UK - have been
plagued by scandals ranging from the mis-selling of loan insurance to the rigging of benchmark interest rates.

Metro Bank made a 2012 net loss of 34.6 mln pounds, which
it said reflected significant investment in building stores, infrastructure and systems.
The bank raised 126 mln pounds in June from external
investors to fund future expansion and is targeting a listing on the
London Stock Exchange in 2014.

RBS shares were down 5.7% to 290 pence on Friday, well

below the 407 pence mark which the government regards as its
buy-in level.
Under Hester, RBS has shed around 900 bln pounds in
assets and is focusing on lending to British households and
small businesses. He said the bank was starting to see a pick-up
in loan demand, echoing comments from Lloyds, which said its
core loan book had returned to growth quicker than expected.
RBS made a pretax profit of 826 mln pounds in the first
quarter, compared with a loss of 1.5 bln pounds in the same
period last year.
The investment banks income fell short of expectations and
it said it expected a muted year as it cuts back on risk and
shrinks the business to focus on fixed income products.
The bank still has to sell 315 UK branches to meet demands
from European regulators. RBS said it was working towards
listing them on the stock market but was also open to other
options and was having talks with potential investors. It expects
to rebrand this business as Williams & Glyns.

Lloyds to sell stake

in Sainsburys Bank
J Sainsbury, Britains third largest supermarket
group, is in advanced talks with Lloyds Banking Group
to take full ownership of the Sainsburys Bank joint
venture.
The statement was prompted by media speculation
over the weekend that Sainsburys was on the verge of
buying out Lloyds 50% stake in the bank.
Sainsburys was the first major British supermarket
to open a bank through the joint venture in February
1997.
Sainsburys Bank provides a range of products
including insurance, credit cards, savings and loans.
A Sainsburys buyout of Lloyds stake would mirror
Tescos acquisition of RBSs stake in Tesco Personal
Finance five years ago.
Sainsburys is scheduled to publish 2012-13 results
on Wednesday.

May 8 - 14, 2013

20 | COMMENT | financialmirror.com

The Japanese Experiment

After years of tweaks, Japan has now initiated a major shift
in its policy paradigm, with reactions ranging from great
optimism that the country may finally be lifted out of a quarter-century of economic stagnation, to concerns that the
authorities dramatic change of course may in fact end up
making things worse. But, while debate naturally focuses on
Japans economic, financial, and political maneuvers, the tipping point could well lie abroad.
Prime Minister Shinzo Abes new government has
embraced a revolutionary (rather than evolutionary) economic-policy approach that engages several initiatives, some
of which were once deemed implausible, unthinkable, or
even undesirable. From the doubling of the money supply to
additional fiscal stimulus and wide-ranging structural
reforms, the new policy paradigm is nothing less than one of
the boldest economic-policy experiments in Japans post-war
history.
To demonstrate their seriousness, Japanese officials
moved quickly to commit to measurable metrics. On the policy input side, they have specified and begun to implement
purchases of securities totaling $75 bln per month (three
times as much, in relative terms, as the US Federal Reserve
currently purchases under its unconventional monetary-policy regime). On the output side, and after many years of persistent deflation (prices fell 0.5% last month), Japan is now
targeting a 2% inflation rate within two years, thus underscoring its commitment to avoid a pre-mature withdrawal of
monetary support for growth.
Already, financial markets have responded with alacrity.
The Japanese equity market is up an impressive 55% since
hints of the paradigm shift started hitting investors radar
screens. At the same time, the Japanese yen has depreciated
sharply, including by more than 20% against the struggling
euro.
This response is part of the transmission mechanism for
the Japanese governments policies. The surge in the stock
market benefits domestic investors, making them likelier to
spend more (what economists call the wealth effect). This,
in turn, should revive corporate animal spirits, leading to
higher investment in new plants and equipment, together
with higher wages and salaries.
These are, of course, the same mechanisms that the Fed
has targeted for almost three years in its own efforts to stimulate higher growth in the US. The macroeconomic out-

comes have consistently fallen short of expectations, and

there is reason to believe that it will be even more difficult in
Japan for monetary policy alone to gain sufficient traction.
Japans aging population mutes the potential impact of
both the wealth effect and animal spirits. Resource flexibility
is lower than in the US. Interest rates are already low. The
experience of deflation is well entrenched. And, given Japans

By Mohamed A. El-Erian

high level of public indebtedness, the risks of collateral damage and unintended consequences are potentially higher.
With gross overall government debt already at 238% of
GDP, some worry that Japan would face the threat of economic and financial dislocation were a failed policy experiment to lead its private sector which traditionally has displayed an enormous home bias to disinvest from Japan.
This does not mean that Japans policy revolution will necessarily disappoint. But, critically, it does mean that even if you
believe that the BOJs actions are necessary for Japan to
emerge from its economic malaise, they certainly are not sufficient.
Japans experiment requires meeting two additional conditions if it is to avoid going the way of previous failed policy
initiatives: meaningful structural reforms that essentially
change how segments of the economy respond and operate;
and other countries continued acquiescence in the currency
depreciation needed to boost the impact of slower-moving
domestic dynamics through meaningful gains in global market share.
Meeting the first condition is in the hands of Japanese citizens and their elected representatives. The required reforms,
though achievable, will test the governments resolve and
implementation capabilities, as well as the populations willingness to face immediate disruptions in exchange for the
promise of longer-term gains.
The second requirement is very different. It can be
achieved only if other countries are willing to sacrifice output, either because they have no choice, or because they

believe that, over the medium-term, a stronger Japanese

economy will benefit them as the longer-term income effects
offset the impact of immediate market disruptions.
But will the rest of the world accommodate Japans bold
policy experiment, or will it take protective steps and thus
impede the operation of a crucial policy transmission mechanism? While initial indications are encouraging, the jury is
still out.
Many affected countries including those hit by the trade
effects (such as China, South Korea, Taiwan, and eurozone
members) and those susceptible to the capital-flow channel
(such as Brazil, Indonesia, and Mexico) have not yet had
enough time to react. Japans policy change was big and
abrupt, and several of the countries on the receiving end have
been focused on complex domestic challenges.
A few countries particularly Brazil, China, and South
Korea have noticed. But their reactions have been generally muted by Japans success in getting a US-led initiative at
the G-20 to classify its policy response as constituting the use
of domestic tools to pursue domestic objectives.
It is just a matter of time until the rest of the world catches up with the reality of how Japans experiment affects
them. The hope is that, bolstered by evidence of Japans serious pursuit of structural reforms, they will accommodate the
experiment in two ways: by not retaliating, and by undertaking their own domestic reforms that compensate for the output lost to Japan. In other words, a growing pie for all better
accommodates all.
The fear is that neither Japans subsequent actions nor the
affected countries domestic realities will justify the risk of
lost market share, especially at a time when the global economy as a whole and global policy coordination is struggling. Here the risk involves currency wars and other beggarthy-neighbor disruptions.
There is currently insufficient data to predict either outcome confidently. As we await additional evidence, let us
appreciate how rarely we witness, in real time, such a
momentous policy shift.
Mohamed A. El-Erian is CEO and co-CIO of PIMCO,
and the author of When Markets Collide.
Project Syndicate, 2013.
www.project-syndicate.org

Controlling Chinas currency

It is indisputable that China is over-issuing currency. But the
reasons behind Chinas massive liquidity growth and the most
effective strategy for controlling it are less obvious.
The last decade has been a golden age of high growth and
low inflation in China. From 2003 to 2012, Chinas annual GDP
growth averaged 10.5%, while prices rose by only 3% annually.
But the unprecedented speed and scale of Chinas monetary
expansion remain a concern, given that it could still trigger high
inflation and lead to asset-price bubbles, debt growth, and capital outflows.
Data from the Peoples Bank of China (PBOC) show that, as
of the end of last year, Chinas M2 (broad money supply) stood
at 97.4 trln yuan ($15.6 trln), or 188% of GDP. To compare, M2
in the United States amounts to only roughly 63% of GDP. In
fact, according to Standard Chartered Bank, China ranks first
worldwide in terms of both overall M2 and newly issued currency. In 2011, China accounted for an estimated 52% of the
worlds added liquidity.
But a horizontal comparison of absolute values is inadequate
to assess the true scale of Chinas monetary emissions. Several
other factors must be considered, including Chinas financial
structure, financing model, savings rate, and stage of economic
development, as well as the relationship between currency and
finance in China.
Chinas intensive economic monetization is a key factor driving its money-supply growth. But Chinas sharply rising monetization rate cannot be judged against the high, steady rates of
developed countries without bearing in mind that Chinas monetization process began much later, and has distinct structural
and institutional foundations.
As China has opened up its economy, deepened reforms, and
become increasingly market-oriented, the government has facilitated the continuous monetization of resources including
natural resources, labor, capital, and technology by ensuring

their constant delivery to the market. This has fueled rising

demand for currency, leading to the expansion of the monetary
base, with the money multiplier that is, the effect on lending
by commercial banks boosting the money supply further.
And, as GDP growth has become increasingly dependent on
government-led investment, currency demand has continued to
rise. Indeed, the rapid expansion of bank credit needed to

By Zhang Monan

finance skyrocketing government-led investment is increasing

the amount of liquidity in Chinas financial system. As a result,
in the last four years, Chinas M2, spurred by a stimulus package totaling 4 trln yuan in 2008 and 2009, has more than doubled.
This trend is exacerbated by the declining efficiency of financial resources in the state sector, a product of the soft budget
constraint implied by easily accessible, cheap capital.
Consequently, maintaining high GDP growth rates requires an
ever-increasing volume of credit and a continuously growing
money supply. So China is stuck in a currency-creating cycle:
GDP growth encourages investment, which boosts demand for
capital. This generates liquidity, which then stimulates GDP
growth.
The key to controlling Chinas monetary expansion is to clarify the relationship between currency (the central bank) and
finance (the financial sector), thereby preventing the government from assuming the role of a second currency-creating
body. According to Pan Gongsheng, a deputy governor of the

PBOC, the relationship between the central bank and the financial sector entails both a division of labor and a system of checks
and balances. In theory, the financial sector serves as a kind of
accountant for the treasury and the government, while the
PBOC acts as the governments cashier.
In practice, however, the relationship between currency and
finance is vague, with both assuming quasi-fiscal functions.
Chinas low official government debt largely reflects the role of
currency in assuming quasi-fiscal liabilities not only the writeoff costs incurred from reforming state-owned banks, but also
the takeover of banks bad debts via note financing and the purchase of asset-management companies bonds. These activities
both damage the PBOCs balance sheet and constrain monetary
policy.
At the same time, finance takes on quasi-fiscal functions by
excluding government fiscal deposits government deposits in
the national treasury, commercial banks fiscal savings, and central treasury cash managed through commercial-bank deposits
from the money supply. Given the large volume of fiscal
deposits which totaled 2.4 trln yuan (3.3% of M2) at the end of
2010 their impact on the money supply cannot be ignored.
Clarifying the relationship between currency and finance is
essential to ensuring that all newly issued currency is backed by
assets. Only by exerting a harder budget constraint on the state
sector, limiting fiscal expansion, and reducing dependence on
government-led investment can Chinas excessive currency
issuance be addressed in the long term.
Zhang Monan is a fellow of the China Information Center,
a fellow of the China Foundation for International Studies, and
a researcher at the China Macroeconomic Research Platform.
Project Syndicate, 2013.
www.project-syndicate.org

May 8 - 14, 2013

COMMENT | 21

financialmirror.com |

The Competition Factor

Since the global economic downturn began in 2008, debate
has centered on the macroeconomic strategies and instruments
used to address the crisis and foster recovery. But correcting
imbalances and addressing short-term slowdowns or recessions,
while important, should not be allowed to overshadow the need to
establish long-term conditions for solid and sustainable economic growth.
So far, macroeconomic policy has borne both the blame for
economic malaise and the hope that it can be overcome. But we
should be devoting as much attention to the microeconomic
problems such as poor incentives, market failures, and regulatory shortcomings that led us into the crisis in the first place.
Indeed, just as microeconomic problems in the financial sector
triggered a credit crunch and fueled a global recession, so microeconomic factors hold the key to recovery. Many economies need
to fix the financial sector and restore credit, while many more need
to raise productivity in order to boost growth and create jobs.
Some industries suffer from counterproductive and ill-conceived regulation; others are ailing as a result of monopolistic
behavior by dominant firms, or because they face a lack of effective competition and transparency in utilities and financial services. Fixing these problems would help us to return to a path of
growth and prosperity for all.
To achieve this, we first must follow the Hippocratic oath and
avoid doing more harm. Governments around the world should
ignore the temptation to relax competition in order to provide
relief to particular industries or economic groups.
The renowned American economist Mancur Olson argued that
stagnation in developed economies results from cartels and lobbies becoming more numerous and powerful over time, until they
eventually drain a countrys economic dynamism. Preserving a
competitive environment in which markets remain open and contestable is the best tonic, because firms must constantly innovate
and perform better under such conditions. This, in turn, makes
our societies more creative and, ultimately, more prosperous.
Efforts to relax competition have many faces. But all of them

make an economy less productive and redistribute

wealth to small, coordinated groups with vested interests and a strong inclination to lobby the government.
The most common approach is protectionism, which has been
part of the political discourse in various countries in recent years.
But official measures to help national producers at the expense of
domestic business customers and consumers are always shortsighted, for they fail to help producers to address the challenges
that they will have to face sooner or later anyway.
Similarly, old-fashioned dirigisme such as attempts to pick
winners, foster national champions, or keep failed business
models alive through state subsidies is both harmful and
doomed to fail. And misplaced regulation for example, in the
service sector remains a barrier to healthy competition in many
countries.
Once we have stopped doing harm, we must start doing the
right things. Economic policy is like gardening: pulling on plants
will not make them grow faster, but a successful gardener can provide them with the right environment in which to flourish.
Relying on competition can help societies to unleash wellfunctioning markets power to provide goods and services. To
achieve this, policymakers must have a sound enforcement framework at their disposal, take an economy-wide approach, and
attract the participation of all stakeholders.
Sound enforcement implies legal tools and resources to pursue
and implement an economic policy, along with an institutional
design that reduces meddling by vested interests. Consider, for
example, the importance of impartial and effective antitrust
authorities, or subsidy schemes that are sufficiently well designed
to ensure that they truly serve the public interest.
An economy-wide approach is needed because markets are
interconnected. Misguided regulation or market failures that harm
competition anywhere can burden the entire economy. The global crisis erupted because major problems in the functioning of the
banking sector had been left unaddressed. The poor functioning of
input markets, such as markets for energy or intermediary prod-

By Joaquin Almunia and

Eduardo Perez Motta
ucts, can also do a lot of economic harm, not least because it hampers external competitiveness.
Finally, strengthening competition throughout the economy
requires broad support. This cannot be achieved without bridging
ideological divisions and overcoming political pressures from particular economic groups. Advocacy can play a key role, by educating not only policymakers, but also citizens and businessmen,
about the benefits of competition. There should be a wide consensus that a pro-competitive environment is one of the keys to economic prosperity.
Australia provides a good example of how pro-competitive policies deliver results. Its economy was one of the OECDs worst in
terms of productivity growth in the 1980s; a decade later,
Australia was in third place. In the interim, all of the countrys economic regulation was examined from the standpoint of maximizing competition, and a national pro-reform consensus was forged.
Currently, significant efforts are underway in several countries,
including Mexico. Structural reforms to boost productivity will
also be crucial to ensure Europes economic recovery and the survival of its social model. The Single Market Acts I & II provide a
comprehensive agenda to tap fully the potential of an integrated
and competitive market of 500 million consumers to catalyze
growth and prosperity in the European Union. We know from
experience that competition works. By basing economic policy on
this experience, we could not only avert Olsons grim prophecy.
We could also accelerate economic recovery, increase the pace of
innovation, and raise livelihoods for millions of people worldwide.
Joaquin Almunia is Vice President of the European Commission
and EU Commissioner for Competition. Eduardo Prez Motta
is President of the Mexican Federal Competition Commission
and Chair of the International Competition Network.
Project Syndicate, 2013.
www.project-syndicate.org

May 8 - 14, 2013

22 | WORLD MARKETS | financialmirror.com

What you should know before trading in gold

When any market crashes, its a shock. For a real nose
dive it normally takes something unexpected and dramatic to
kick it of. If people had any idea of the reason or that it was
coming then the fall would start early and be more shallow.
Gold fell off a cliff on Monday and many were left
scratching their heads. Did gold crash because of good news
or bad news? Was the crash engineered by dark forces
manipulating the world economy and protecting the dollar?
The bottom line is no one really knows why gold crashed.
Likely someone was a forced seller. Markets, gold or
otherwise, have a logic all their own.

By Clem Chambers
Contributor, Forbes

Gold is a badly understood thing. Gold lovers have a crazy

view on it, even governments seem to have an irrational take.
Gold is the mad metal and here are five things to bear in
mind when you love or hate on gold because:
1. There is gold and then there is paper gold
The gold price is set buy trading in derivative contracts in
gold, contracts that are mostly not backed by the physical
metal. When gold slumped on the 15th of April it said that
about two months of the worlds production was sold into
the market. This was not real gold but the promise to deliver
gold or the equivalent in cash. When you buy a gold ETF or
a gold share you are not buying gold you are buying a proxy
for gold.
This means the two values, between real gold and paper
gold can get out of whack and that the value of paper gold
can heavily influence the value of the metal in strange ways.
Thats not to say it makes it more or less valuable, only to say
that when markets get into trouble the value of the proxies
they trade can shift dramatically with no real linkage to gold
production or even demand.
As such gold fans need not worry about short-term
moves, however dramatic, because they should be holding
gold for the long term and for the benefits that gold offers in
diversification.
Dont trade gold. You will lose.
2. There are two schools of thought on inflation
Lots of people believe we will get high inflation.
Government QE has printed vast amounts of new cash and
many expect this to turn into price rises and a cycle of
growing inflation. If you believe this you must hold gold.
On the other hand, banks were creating vast amounts of
money during the credit boom and that vanished so in fact
money supply may not be being increased; only replaced by
QE. This could explain the lack of inflation in the official
numbers. As such gold isnt a great investment.
Skeptics suggest the inflation is the alright, just not in the
goods we buy from China. You know the stuff, iPhones etc.

but that inflation can be clearly seen in

food and services. As such gold looks a
reasonable bet.
If people are starting to believe the
no inflation story gold will fall. But is
it really so low, if the bond bubble burst
what then?
3. The gold standard
Sadly for the hard core gold bugs,
there will never be a new gold standard.
There will never, ever be a return to a
gold standard, not even if the world
implodes. If there was gold would have
to be a million dollars an ounce.
There is just not enough gold in the
world to be used as a value backed
money medium. If gold was turned
into money it would end up being
money as detached from real value as
paper. Communists would love gold as
money because if we went back to gold
coins as cash, we simply wouldnt have
much money around and little
economy to go with it. Of course
Romans had gold as money and guess
what, they had mighty inflation too.
Paper doesnt create inflation and
devaluation, government does, and it
can do it with a gold backed currency
or without it.
4. Gold is not a stable store of value
It is a myth to believe gold is a constant store of value.
Like anything else the price of gold is created by supply and
demand. When the Spanish pillaged South America and
brought the gold and silver back to Europe, there was
rampant inflation. More gold meant gold money was worth
less and the price of things in gold went up.
Gold used to be worth a lot less than it is today. In ancient
times silver was money and gold was five times more valued.
Then the ratio went to 10, then 20 then 40 and so on. Now
this ration swings about daily. You dont have to look hard to
see gold is as vulnerable to swings in values as any other
commodity. When its fixed by government, its value is as
phony as any dollar bill.
5. Gold is a commodity
To many people gold is something special. Its more than
just another metal that comes out of the ground. This may
well be because since the dawn of time gold has been a status
symbol and status is what breeds success or simply just
breeds.
Whatever you feel about gold, it is just a metal. That isnt
necessarily a bad thing and it doesnt mean it needs to be
cheaper.
Gold supply has not kept up with demand so its price should
rise. Where once gold was used on things that could be easily
recycled. Now gold is used in things that dont get recycled in

a way that the gold is being recovered. So gold is being lost.

As such a lot of gold is being thrown away. Add this to the
fact that there is claimed to be a deficit of new gold mined
above consumption, gold should enjoy upward price
pressure, with or without runaway inflation.
However, theories apart, if you want to know which way
gold is going to move the best thing to do is watch it every
day on sites such as ADVFN.com and you should build up a
feel for its real value. Gold should be a small part of your
investment portfolio and nothing beats keeping tabs on your
investments and the markets themselves.
Nothing holds the same value for long and the road to
financial wellbeing is to buy what is cheap and sell what is
expensive and to know which is which. On ADVFN that wont
cost you a penny, golden or otherwise.
Of course you want a prediction on the future of gold and
a wild one too. Well you are in luck!
Gold will be $5,000 by 2020, because inflation will hit.
When the short end of the bond curve cant be shuffled
back into the long end at a low interest rate the short bonds
will be turned into cash as the bonds come due. This will
explode economic activity, assets and inflation. If the state
reflationists like Professor Kaufman are right, this wont
happen. But then how are they going to get the deficit down
as a sustainable function of GDP? The idea is slowly.
Twitter: @ClemChambers

Parcel2Go boss says Amazon, eBay is way for SMEs

Fil Adams-Mercer, the founder of the UKs largest
online parcel delivery service Parcel2Go, has said he
believes online marketplaces such as eBay and
Amazon are still a great option for start-up
businesses.
He recalled on the companys blog his own
experiences setting up businesses, provided tips for
budding entrepreneurs and even suggested a business
plan he claims anyone can make money from.
But when it comes to online trading, Adams-Mercer
believes eBay and Amazon remain two of the best
options for start-ups.
eBay and Amazon are probably the best places to
start anything off, he said. But it is more difficult
than you think because a lot of people dont calculate
things like their shipping costs and VAT.
According to the millionaire, one of the most

important things that anyone can do if theyre

thinking of getting their own business off the ground
is to simply get on with it and make a start.
Stop being afraid. Yes, you will get ripped off
sometimes in life but its better to do something and
fail than not do it, just as long as you learn from it,
he said.
Youd find that youd work for half the money
youre on now if you could survive off it, and be a lot
happier being the master of your own destiny.
Parcel2Go courier services are now used by more
than 750,000 people in the UK. A huge range of
domestic and international services are on offer,
including economy, same day and next day parcel
delivery.
Parcel2Go uses worldwide couriers such as
Parcelforce, FedEx and CityLink.

May 8 - 14, 2013

financialmirror.com | GREECE | 23

IMF: Greece making progress,

but must do more on taxes
Greece has made progress in reducing government debt and
improving its competitiveness, but needs to follow through on
structural reforms to ensure its economy recovers, the IMF said
on Monday after a mission visit to the country.
The Fund said Greece must do more to fight its notorious
tax evasion and open up labour competition to ensure the burden of austerity does not fall disproportionately on wage-earners and pensioners.
Decisive corrective actions are needed in each of these areas
to promote an early supply response and achieve a more balanced distribution of the burden of adjustment, the IMF said
after its visit. The mission welcomes that the government is
refocusing its program in recognition of these problems.
Measures to cut Greeces budget deficit and make its economy more competitive are key conditions of its 240 bln euro
bailout from the EU and the IMF.
But tax evasion is endemic, making it more difficult for the
government to shore up its finances and denting support for
the pro-bailout ruling coalition.
Middle-class wage earners and pensioners, the hardest-hit
group in the six-year recession, account for 70% of total personal income declared.
The IMF called on the government to strengthen the independence of the tax administration to make it easier to reform
the system. It also said Greece must lay off public workers to be
able to hire new qualified staff, and not just rely on voluntary

departures. The taboo against mandatory dismissals must be

overcome, the IMF said.
Under the current bailout plan agreed in November, Athens
has to cut 150,000 public sector jobs overall from 2010 to 2015,
about a fifth of the total, through hiring curbs, retirement and
dismissals.
Lay-offs are a sensitive issue in Greece where unemployment has hit a record high of 27.2% and the economy is now
in its sixth year of recession though recent polls show most
Greeks want the reform of the public sector.
As a condition for receiving further bailout funds, MPs last
month approved a plan that makes it easier to fire government
employees for disciplinary reasons, and also extends an unpopular property tax and opens up professions such as accountants
and bakers.

DEBT TOO HIGH

The IMF said Greece has made exceptional progress on

reducing its fiscal deficit since 2010, with its primary budget
surplus, or the surplus before taking into account debt financing costs, set to improve by 10% by the end of the year.
But the countrys public debt remains much too high, the
Washington-based lender said.
It is, therefore, very welcome that European partners have
now accepted that Greece could need significant exceptional
support on below-market terms in order to restore debt sustain-

Moodys assigns B1 ratings

to Frigoglass; stable outlook
Moodys Investors Service has assigned a first-time provisional (P)B1 corporate family rating (CFR) and B1-PD
probability of default rating (PDR) to Frigoglass S.A.I.C., one
of the worlds leading manufacturer of beverage coolers and
one of the largest glass bottle manufacturers in West Africa
and the Middle East.
Concurrently, Moodys has also assigned a provisional
(P)B1 senior unsecured rating to the groups proposed issue
of EUR 250 mln of senior unsecured notes due 2018. The
outlook on all ratings is stable.
The ratings recognises the groups global presence and
its long-term relationships with customers including the
largest Coca-Cola bottlers and some of the largest beer producers in the world, said Paolo Leschiutta, Moodys lead
analyst for Frigoglass.
These strengths compensate for Frigoglasss modest
size overall approximately EUR 581 mln in revenues as at
year-end 2012 in comparison to its much larger customer base, and a degree of customer concentration, as

Coca-Cola Hellenic (CCHBC, Baa1 negative) accounts for

25% of the groups revenues, added Leschiutta.
The rating is also supported by the dominant position of
Frigoglass in most of its markets, particularly in emerging
markets.
Incorporated in Greece, Frigoglass produces beverage
refrigerators (or iced-cold merchandiser) for global players
in the beverage industry, with key customers including
Coca-Cola Company bottlers, major brewers, Pepsi and
dairy companies. Truad Verwaltungs A.G., a trust controlled
by the Leventis family, owns 45% of the shares and is a longterm investor in the group.
Frigoglass was part of CCHBC group until 1996 and has
retained strong ties with the group since then. While
Moodys recognises Frigoglasss success in recent years in
increasing its customer diversification, the group is likely to
have weak negotiating power with most of its customers
and remains exposed to raw material price volatility, which
could affect its profitability going forward, Moodys added.

Emma Delta takes OPAP stake for 652 mln

The Greek privatisation body Hellenic Republic Asset
Development Fund (HRADF) said it has accepted the
improved offer of Emma Delta Ltd for the acquisition of a
33% stake in gaming monopoly OPAP.
Emma Delta, a Czech-Greek joint venture that was the
sole bidder in the final stage of the auction, raised its bid
by 30 mln euros to 652 mln (EUR 6.20/share), while the
Greek state will also receive 60 mln euros (EUR 0.57/share)
in a cash dividend for FY12 corresponding to its 33% stake
in OPAP.
This means that the total financial consideration for
33% of OPAP shares is 712 mln euros (EUR 6.77/share) or
a 10% discount against current market capitalisation of
2,389 mln euros, said Dimitris Birbos, analyst at the
Investment Bank of Greece. The stock was last trading on
the Athens Stock Exchange (ASE) at EUR 7.49/share.
The winning bidder Emma Delta is a regulated variable
equity fund, controlled by Jiri Smejc (66.7% - shareholder
of PPF Group) and George Melissanidis (33.3%). The
funds investors are the Emma Group, KKCG, ICT Group,
J&T Finance Group, businessmen George Melissanidis and

Christos Kopelouzos, while local media reported that

Lottomatica is also participating in Emma Delta.
The HRADFs independent appraiser has estimated the
fair value of 33% of OPAP shares at 650 mln euros (post
2012 dividend). According to OPAPs business plan for
2013-2022, the company is expected to record net profits
of 213 mln euros (EUR 0.67/share) in 2015 (first year of
full operation of its new games), which implies a 10x 2015e
p/e or a 17% discount against Lottomaticas p/e ratio for
2015.
On the whole, we are not excited with the final consideration paid for the controlling stake in OPAP, which will
start reaping the benefits from the launch of its new games
(VLTs, scratch tickets, state lotteries, internet games) from
2015 onwards, explained IBGs Birbos.
On the positive side, the successful conclusion of
OPAPs privatisation will send a strong message to local
and foreign investors that the Greek government is determined to implement the asset sales programme agreed
with its creditors, thus further improving investor sentiment for the Greek economy, Birbos added.

ability and that they have committed to provide additional

relief, if needed, the IMF said, in order to ensure debt falls
below 110% of GDP by 2022.
Finance Minister Yannis Stournaras said the country would
seek more debt relief if the government managed to achieve a
primary surplus this year.
And Greeces international lenders have also agreed they
could give the country further debt relief, probably in the shape
of lower financing costs, if it meets its fiscal targets.
The critical long-term goal for Athens is to bring its debt as
a proportion of GDP down to a manageable size. The ratio currently stands at more than 160%. The IMF has said it must be
cut to 120% by 2020 to be sustainable.
The IMF has insisted on strict debt targets as a condition of
helping Greece get its economy in shape, but the Fund has also
been criticized for failing to predict Greeces deep recession.

Alpha Bank to trade ex-rights

Shares in Alpha Bank will trade without rights to its planned 457
mln euro share offering from May 13, the Athens bourse said, as
the countrys big banks kick off their recapitalisation.
Greeces top four banks, including Alpha, need 27.5 bln euros in
fresh funds to restore their solvency after incurring losses on bad
loans and on the countrys sovereign debt write-off.
Alphas rights offering, part of a 4.57 bln euro capital strengthening exercise, got the go-ahead from the securities regulator and
will be underwritten by J.P. Morgan, Citigroup, HSBC and Frances
Credit Agricole.
Rights will trade from May 17 to 27, and the subscription period for the offering will run from May 17 to 31.
The bank will also issue new common shares to raise up to 92.9
mln euros on which existing shareholders will waive their rights.
These shares will be privately placed with institutional investors.
The remaining funds to plug its 4.57 bln euro capital need will
be provided by the state rescue fund - the Hellenic Financial
Stability Fund (HFSF) - in exchange for new shares with limited
voting rights.

EU clears aid for ATEbank

The European Commission has approved the liquidation aid
given to ATEbank, whose healthy assets were sold to Piraeus Bank
in July 2012, with the rest to be wound down.
While three measures taken by Greece, such as a 7.471 bln euro
injection to bridge the banks funding gap, were considered to be
state aid for ATEbank, the European Commission said they were
limited and within the rules.
The Commission found that the aid was limited to the minimum necessary to ensure an orderly resolution. In addition, the
market exit of ATEbank limits the distortions of competition
brought about by the aid, said the Commission.
It said the takeover of healthy assets by fourth-biggest lender
Piraeus Bank did not constitute state aid, with Piraeus putting in
the best bid in a tender process.

Hochtief sells airports

Hochtief said it sold its airports unit to Canadas Public Sector
Pension Investment Board for 1.1 bln euros ($1.4 bln), to help fund
a shift towards ground transportation and energy infrastructure.
The division has holdings in airports in Budapest, Duesseldorf,
Hamburg, Sydney and Tirana, said the German builder, which is
controlled by Spains ACS It also sold Athens Airport as part of the
transaction, which will take retroactive effect from January 1 this
year, even though it had previously taken that hub out of the bundle, citing economic troubles in Greece.

May 8 - 14, 2013

24 | BACK PAGE | financialmirror.com

Few roadblocks to equities climb after new high

With Fridays U.S. payrolls report serving as a springboard

to lift Wall Street stock indexes to new all-time highs,
investors are left to contemplate whether the gains will fizzle
or if the upward momentum will continue.
Investors cheered the jobs report on Friday, which showed
employment rose at a faster-than-anticipated pace in April
and hiring in the prior two months was much stronger than
previously thought.
The report eased investor concerns after a raft of soft data,
particularly in the manufacturing sector, and sent the S&P
500 hurtling past what was viewed as its final resistance level
of 1,600 to a fresh all-time closing high of 1,614.42.
With little in the way of economic data on tap this week
and earnings season moving into the home stretch, there
appears to be little that could derail a move higher.
Thats the $64,000 question - without a micro or macro
focus, what do we shift our attention to? said Art Hogan,
managing director of Lazard Capital Markets in New York.
I would argue in a lack of critical information this market has found a path of least resistance to the upside.
The economic calendar for the coming week is extremely
light, with consumer credit and wholesale inventories for
March among the few notables.
Earnings season continues its wind down, with Walt
Disney Co the only Dow component scheduled to report for
the week. Its results could also provide a glimpse into the
health of consumer spending.
Other notable S&P 500 companies expected to post earnings include Tyson Foods, Dean Foods, Electronic Arts,
Whole Foods Market, Nvidia Corp and Priceline.com.
Corporate earnings have improved from earlier market
expectations, with the expected earnings growth now at
5.2%, up from 1.5% at the start of earnings season.
According to Thomson Reuters data through Friday, of

the 404 companies in the

benchmark 500 index that
have reported earnings, 68.3%
have topped analyst expectations, above the 63% average
since 1994 and the 67% average for the past four quarters.
But revenue remains disappointing, with only 46.3% of
S&P 500 companies topping
Wall Street expectations, well
below the 62% beat rate since
2002 and shy of the 52% average for the past four quarters.
With the S&P easily breezing past what was seen as its
final resistance point of 1,600,
the index is now in uncharted
waters for investors to try and
predict when a pullback may occur or gains may slow.
(The S&P 500) broke through that 1,600-resistance level
like it wasnt even there based on the payrolls report, said
Paul Mendelsohn, chief investment strategist at Windham
Financial Services in Charlotte, Vermont.
Generally you dont want to fight a 52-week high, you
definitely dont want to fight an all-time high.
For the week, the Dow rose 1.8%, the S&P 500 gained 2%,
and the Nasdaq advanced 3%.
With the gains on Friday, the S&P 500 put together its
first consecutive weekly advances since a seven-week run
that ended in mid-March, a possible sign of continued trends
higher. Markets are heading into the traditionally weaker
summer months. The index has fallen in May for the past
three years.

The key now is, you want to see the bulls continue to
push higher, you dont want to see the slip back, said Ryan
Detrick, a senior technical strategist at Schaeffers
Investment Research in Cincinnati, Ohio.
The ultimate contrarian would say a lot of that very well
could be priced in, the thing most people arent expecting is
a continued rally in the normally weak summer months, he
said.
By the same token, the lofty levels for equities could make
them ripe for a pullback, with investors resuming the battle
between booking profits and buying dips. That battle caused
the index to alternate between weekly gains and losses
throughout the latter portion of March and most of April.
It is a bipolar market. It is either all on or all off,
Mendelsohn said. Either things are great and we are going
to the moon, or everything is falling apart and its all over.

May 8 - 14, 2013

financialmirror.com | CSE PRICES | 25

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

71 264
18 224
10 341
5 066
104 895

1.24
0.25
0.78
0.75
0.49
0.27
0.63

0.15
0.33
0.09
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
7 915
5 038
4 100
4 275
3 850
3 930
2 688
238 753

1.78
3.20
0.25
0.45
0.15
4.69
0.31
3.00
0.09
1.96
0.05
0.48
1.37

0.13
0.13
0.65
0.20
0.38
0.13
0.42
0.17
1.06
0.06
0.68
0.12
0.34

14 631
1 587
5 408
25 421
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
1 709
11 934
4 559
5 694
7 735
941
164
31 408
62 038
1 658
15 298
5 421
298
1 650
2 557
2 727
6 825
3 175
207
196
75 000
416 263

0.49
0.02
0.45
0.76
0.79
0.33
0.40
0.27
0.03
0.65
0.09
0.27
2.08
5.70
1.86
0.43
0.29
0.30
0.67
0.04
0.15
2.73
0.92
-0.10
0.09
3.40
0.38
0.59
0.36
0.75
0.63
0.09
-0.0075
0.18
1.31
0.38
0.004
3.40
0.04
0.12
0.43
1.33
2.44
0.34
0.04
0.11
0.19
0.77

0.30
0.56
0.11
0.85
0.18
0.11
0.06
0.16
0.08
0.46
0.38
0.90
0.07
0.24
0.16
0.33
0.20
0.19
0.57
0.23
0.89
0.18
0.12
-0.15
1.27
0.10
0.25
0.99
0.20
0.07
0.28
0.14
-1.47
0.40
0.54
0.20
10.26
0.44
0.03
0.43
0.16
0.03
0.09
0.76
0.25
0.18
5.38
0.60

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

6 005
-1 354
-1 880
-492
-34 500
3 181
-49
-1 767
-1 071
1 006
-5 616
-3 284
-39 821

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
-3 913
-7 733
-104
-2 998
-652
-4 639
-4 127
6 152
658
1 600
-529
-257
-6 807
-15 527
1 608
5 226
-2 268
-112
-3 948
-802
108
-1 263
-10 021
1 324
-3 328
-337
-20 039
10 783
-868
-6 356
75
151
480
973
-19 200
1 577
-891
13
-56
2 739
-87 300

P/E ratio
2012

0
0
-23 440
2 040
-13 281
-30 442
-65 123

2012
-3 731
-637
-1 284
1 532
403
-7 040
-376
-16 998
-14 283
-95
-1 275
-366
-9 917
-2 868
4 381
-226
664
-666
-1 404
-8 999
-6 859
673
-3 246
-2 602
-203
-8 013
-670
-2 852
-2 408
-9 471
-1 006
-1 399
-318
-14 396
5 428
-719
-5 473
-148
-1 463
-1 593
-3 323
-21 450
2 218
-852
-192
-74
1 153
-142 443

n/a
n/a
n/a
8.93
n/a
n/a
1.55

4.57
n/a
n/a
n/a
n/a
2.49
n/a
n/a
n/a
3.83
n/a
n/a
5.12

Cents
-76.37
-89.79
-3.78
2.75
-5.39
-6.61

Cents

1.50

6.10

Cents
5.26
-1.88
-1.03
-0.28
-12.22
23.71
-0.13
-21.55
-2.38
2.87
-4.57
-6.84

Cents
2.31
1.50

%
9.63
3.49

2.10

22.83

Cents
-3.77
-0.40
-1.16
3.92
2.61
-4.97
-3.73
-15.72
-4.96
-0.39
-0.61
-7.12
-7.21
-93.76
4.76
-1.51
0.82
-4.93
-8.78
-2.58
-20.17
14.01
-3.25
-11.65
-2.55
-25.87
-3.73
-13.98
-3.86
-9.31
-2.33
-1.78
-2.13
-3.39
6.20
-3.25
-1.43
-4.12
-0.49
-4.83
-9.10
-32.25
6.82
-6.98
-0.93
-0.76
1.54

Cents
0.93

%
6.28

7.00
1.20

10.77
8.28

3.20

10.63

0.45

4.17

1.70

2.40

2.00

9.52

2012
High
Low
EUR
EUR
A K

Last
Close
EUR
K
2/5/13

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

97.61
39.10
117.61

114.86
44.40
168.87

-15.02
-11.94
-30.35

113.87
0.278
0.047
0.177
0.300
0.048
0.019

83.34
0.185
0.040
0.107
0.226
0.042
0.011

88.60

104.69
0.251
0.044
0.175
0.263
0.045
0.018

-15.37
-34.29
-6.46
-6.67
-38.89

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

562.64
0.220
0.410
0.160
0.092
0.054
0.590
0.130
0.500
0.095
0.100
0.032
0.056

562.64
0.240
0.430
0.160
0.092
0.058
0.590
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

-10.32
-4.00
-2.05
-12.57
-20.00
0.00
-43.81
0.00
0.00
0.00
10.00
0.00
-3.45

657.64

624.36

625.18
0.148
0.010
0.049
0.650
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
0.095
0.585
0.073
0.056
0.179
0.012
0.011
0.074
0.709
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

-1.79
-3.27
-16.67
8.89
0.00
-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
6.74
0.00
5.80
5.66
-2.72
-7.69
0.00
-1.33
-3.27
0.00
-23.08
0.00
0.00
0.00
6.06
-10.87
-8.70
0.00
0.00
0.00
0.00

0.115
0.246
0.042
0.011

% Change

since

May 8 - 14, 2013

26 | CSE PRICES | financialmirror.com

CSE
CODE
OASIS

K.

APPROVED INVESTMENTS / EENYTIKOI OPAN.

INVESTMENT INDEX
ACTIBOND GROWTH FUND
ACT

APOLLO INVESTMENT FUND

APOL

CYTRUSTEES INV. PUBLIC CO

CYTR

DEMETRA INV. PUBLIC CO.

DEM

DODONI PORTFOLIO
DOD

HARVEST CAPITAL
HCM

INTERFUND INVESTMENTS
INF

ISCHIS INVESTMENT
ISXI

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
0.0012
0.0660
0.1709
0.0589
0.2229
0.0265
1.0430
2.1427
0.6125
0.2000

-53.93
-51.41
-63.83
-66.13
66.67
36.36
-71.33
-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
99 271

MARKET TOTAL / OIKO AOPA

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
4 316
48 600
565
1 260
2 771
473
418
405
2 183
5 458
709
3 704
77 077

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
64 526
210 466

0.1728
0.06
0.88
0.02
-1.21
0.12
0.57
-0.12
-0.20
-0.08
1.30
0.086
0.05
0.13
0.0100
0.29
0.67
0.11
0.38
0.06
-0.38
0.30
0.43
0.004
1.49
0.18
0.28
0.000
-0.08
0.05
-0.12
0.52

1 047 454

-98.84
1.68
0.11
2.41
-0.03
0.27
0.13
-0.19
-0.01
-0.04
0.46
0.29
15.00
0.19
-70.00
0.34
0.19
0.09
0.12
2.46
0.00
0.78
0.37
2.75
0.01
0.44
0.20
6.67
-0.04
-0.08
1.25

-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
-3 423
-2 559
-22
-443
-251
-57
-182
155
-1 921
12
-782
-12 104

2011

2012

-69
-12 265
399
-6 400
-2 974
-5 512
-3 755
-23 885
-9 100
-243
-701
35
-4 283
-219
-1 465
-24 581
-77
87
621
-10 339
-11 700
-545
2 145
-1 484
-8 648
-1 879
-328
-1 953
-15 879
-3 735
-60
-8 961
-157 753
-5 499 405

18

-17 728

18

-17 728

-1 011
-12 265
-350
-6 400
-217
-11 266
-10 859
-55 832
-9 100
-391
-70
35
6 553
-2 111
-1 465
-220
-77
87
-3 654
-713
-11 700
-605
31
494
-8 648
-959
-410
-450
-24 032
921
-60
-825
-155 569

-1 166 383

-1 909 991

-415 060

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
-1.71
-0.91
-0.16
-0.78
-2.28
-2.85
-0.90
5.68
-70.39
0.88
-5.81

Cents

2012
High
Low
EUR
EUR
A K

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

Last
Close
EUR
K

2/5/13

11.00

572.39

450.90

13.75

520.49
0.017
0.093
0.097
0.243
0.002
0.090
0.049
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

-4.68
0.00
-19.13
-18.49
-2.80
-50.00
15.38
2.30
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
-6.76
-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
-7.06
0.05
1.07
-10.68
-9.93
-0.76
-0.64
-3.82
2.39
-0.05
-0.83

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
GLOBAL DIGITAL SERVICES
TOTAL

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

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
13 000
18 568
25 000

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
20 020
7 799
250
580 061

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
0.01
0.01

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
30/04/13

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.