The Cypriot government is examining tax incentives to encourage companies to join the Cyprus Stock Exchange (CSE), as the Nicosia-based bourse intends to privatise and launch a new market for small and medium-sized enterprises (SMEs).
According to a local media reports, a delegation from the CSE headed by its Board Chairman, Marinos Christodoulides met with Finance Minister Constantinos Petrides last week. Christodoulides said an advisory firm would be selected to advise on the privatisation process.
“We are in close contact and close collaboration; we have discussed the CSE’s strategic development plan, which includes a privatisation effort and a strategic investor by the end of 2022,” Petrides told a press conference after the meeting.
The Minister added that finding a strategic investor would be “decisive in developing the stock market as an alternative and an additional form of finance for the economy and businesses alike.”
The two officials urged companies to consider entering the domestic capital market, as an alternative source of funding against the backdrop of the Covid-19 crisis.
The Minister and the CSE head also underlined that currently CSE could not be compared with the stock exchange boom and bust in 1999-2001 in terms of regulation and supervision.
“The tool is there, liquidity is there, we are working with the CSE Board so that the stock market could be used by businesses as an alternative source of financing and we are working towards that direction both through incentives and the finding of a strategic investor,” Petrides elaborated.
He also said the Ministry is considering tax incentives for companies intending to list on the Cyprus Stock Exchange and welcomed the CSE’s plan to create a new market for SMEs. Christodoulides had announced several months ago that the CSE intends to launch this new market.
On Wednesday (June 23), the CSE chief clarified that although this new market will be covered by the MIFiD 2 directive, its regulatory requirements would be less demanding compared with other CSE-regulated markets in order to allow growth. “This will enable SMEs to join the CSE and then to enter larger and more demanding markets.”
CSE’s request to establish a new market, or alternate listings, for SMEs, is currently under examination by the Cyprus Securities and Exchange Commission (CySEC).
The Cyprus Stock Exchange has seen a shortage of listed companies, limited trading and low liquidity in recent years but has great potential to offers opportunities for investors.
The Mediterranean island is a popular investment hub thanks to its strategic location (between the three continents of Africa, Europe, and Asia), its attractive tax and legal structure, a well-organised banking system and highly-qualified labour force. Cyprus is also an internationally acclaimed shipping and business and services center.