Gold Magazine January - February 2014, Issue 34 | Page 57
Regarding
the FX and
investment
firm industries,
the sector
continues to
prosper
reduction in that of Greeks, Germans and
Belgians.
Fourth, there is an expectation of an
increase of FDI into Cyprus driven by international investors seeking opportunities
in the real estate sector and other viable
businesses that are strapped for cash in the
credit crunch that followed the bail-in.
Fifth, there have been other OTC transactions that have spurred some liquidity
into the market. MeritKapital was the first
broker on the island to sell a Bank of Cyprus’ bailed in’ deposit to a large US hedge
fund. Also, there has been some M&A
activity in the hotel industry, whereby
‘bailed in’ deposits were partially or
wholly swapped for outstanding debts,
within the same bank, of the targeted
investment. MeritKapital is in advanced
discussions for numerous other ‘deposit’
deals. An increase in all such OTC transactions and further innovative solutions
should ease the ensuing credit crunch.
Last, the natural gas reserves off Cyprus’s southern shore are a significant factor to consider in the island’s economic
recovery. The Aphrodite gas field, which
was discovered in 2011, is estimated to
contain around 4 trillion cubic feet (tcf)
of gas, the majority of which could be
exported to satisfy the energy needs of
Asia and Europe. However, the construction of an offshore LNG plant and added
transportation costs would only make economic sense at 5 tcf. If some agreement is
reached for this LNG plant to liquefy the
excess gas of neighbouring Israeli fields,
then the pricing will start to make financial
sense. A latest positive finding is the recent
statement by US-based Noble Energy,
which disclosed recently that the same gas
field may – based on exploratory drilling
– also hold between 1.2-1.4 billion barrels
of oil. This is very encouraging as the time
and cost to drill and extract oil is much less
than that for natural gas which transpires
into a more viable project.
Nevertheless serious challenges remain.
Despite improving operating income ratios, the viability of BOC continues to be
uncertain. Non-performing loans (NPLs)
have increased to 47% in Q3 from 38