Rich investors grew even richer while nearly half of all Cypriot households, which poured $2.7 billion into the stock market during its 1999 peak, had a raw deal, a central bank study said Monday, November 12.
"There are strong indications that the stock market crisis has accentuated disparities in wealth," central bank governor Afxentis Afxentiou told a news conference in Nicosia. He published the findings of a central bank commissioned study on the effects of the Cyprus Stock Exchange (CSE) boom-bust cycle on the economy.
Ordinary households have portfolio losses of $860 million since the CSE made 800 percent gains in 1999, only to crash just as fast in 2000-2001. At its zenith, the CSE all-share index stood at 849 points in November 1999, and slumped to a two-year nadir of 104 points in September 2001. The rush for hard-to-get equities on a bull-frenzy CSE enticed 43 percent of Cypriot households to smash their piggy banks and become wheeler-dealers on the Nicosia trading floor.
"Middle income households spent the equivalent of their entire annual income on the stock market. Most of them suffered realised and unrealised losses," said Afxentiou. "Those who profited were the higher income groups who held shares before 1999 and benefited the most from inflated shares," he added.
The study of 2,017 households shows that only three percent of investors made any profit during the boom because most new investors had used cash put away for a "rainy day" and were in for the long haul.
Apart from a huge surge in equity prices between August to November 1999, the market started spiraling ever downwards. Twenty-three percent of CSE shares were purchased with loans, while the majority was bought with family savings.
According to the study, money put away for children's education or buying them a marital home was frittered away on the CSE stampede. An average of $20,600 per household was spent on shares during 1999-2000, against an average annual income of almost $25,000. — (AFP, Nicosia)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
