Sad, sad song:
Once-dream Cyprus market nosedives amid violence, protests
HAMZA HENDAWI
The Associated Press
NICOSIA, Cyprus ---- Investors rejoiced last year as stock riches piled up and the Cyprus Stock Exchange closed nearly 700 percent higher, adding to a rare period of stability in this divided island nation.
Enter 2000 and the fairy tale of the Cyprus Stock Exchange has turned into a sinister story of bomb blasts, gangsters, violent protests ---- and a nearly 50 percent drop in the index since the start of the year.
The boom-and-bust in Cyprus is a tumultuous twist on how fledgling markets around the world get caught up in the rush to embrace capitalism.
As market experts here use jargon like "correction" and "market psychology" to explain the downturn, many investors are irate ---- and some are getting even. Losses are cutting into necessities like children's college educations.
"The money is nearly my entire savings," said Andreas Magos, a 32-year-old photo lab owner from Nicosia, whose $122,000 investment is now worth about half that. He isn't selling yet.
The downturn in the 4-year-old market began in March and accelerated in June and July, sparking the first act of market-related violence on this Mediterranean island.
About 40 disgruntled investors attempted to storm the marble-and-glass offices of the exchange on July 26 to protest slumping prices. Police stopped them. The building, in a fashionable part of downtown Nicosia, is now guarded round-the-clock by a private security firm.
Several traders have since hired personal bodyguards, and the offices of most of the island's 30 brokerages now have guards.
It is all a far cry from 1999, when the index soared on heavy investor demand, the prospect of local banks being listed on the larger Athens market and political stability not seen since Cyprus was divided into ethnic Greek and Turkish zones after Turkey's invasion of the island in 1974.
By late 1999, a third of the island's 700,000 Greek Cypriots had money invested in a market whose 90-minute, Monday-through-Friday trading sessions captivated most of the population.
At its peak in November, the total value of shares stood at $24 billion ---- compared with about $14 billion now.
"It is a typical case of boom and bust," said Ioannis Tikrides, head of research at Laiki Investments, the Nicosia-based investment arm of the Popular Bank financial group.
But with the bust came the violence, which grew more intense.
A spate of bomb attacks in August damaged offices of brokerages in the coastal towns of Larnaca and Paralimni, and destroyed the $80,000 car of a prominent trader in the capital.
No one was injured in the attacks, but police are looking into whether organized crime is involved, one of several leads being pursued.
Justice Minister Nicos Koshis recently said well-known underworld figures have been spotted in an area reserved for investors at the stock market. Some brokers have been approached by gangsters demanding to buy shares, the Association of Brokers has told authorities.
Meanwhile, speculation is rampant that gangsters were buying stocks to launder money earned from drugs and prostitution, though a police investigation was inconclusive.
Confidence in the market was further undermined by a public dispute in which major brokerages accused each other of engineering the market's slump to buy shares on the cheap for their investment units.
Parliament tried to help restore investor confidence, but an emergency session on Aug. 2 during the summer recess failed to produce legislation to speed up the screening of companies seeking a listing on the Cyprus market.
An estimated 160 companies are waiting to join 70 already listed.
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"A lot of people have lost a great deal of money," said Yiannos Andronikou, chairman of the Suphire Stockbrokers brokerage in Nicosia. "We tell our clients that so long as they don't realize their losses they remain ... losses on paper only."
Andronikou and many other investment experts expect the market to bottom out this month or next before it begins to recover.
"I am not getting out," said Akis Nicola, a 40-year-old father of two from the village of Paliometocho, near Nicosia. "I believe that sometime the market will be up again. Maybe after a year or two."
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