Sunday, January 8, 2012

Today's Major Market Move: Cypriot Stocks Down Over 10% in 2012

While most of Europe is trying to kick off 2012 by shrugging off their problems, Greece and Cyprus continue to struggle. The Greek equity market is down over 10% for the year (we last featured Greece on January 3rd after a one day 2.5% drop), and the Cypriot equity market (which often times acts like a Greek 2X ETF) is down over 16%. Here's the bottom ten benchmark equity indexes for 2012:

Click here to go to the live table.
Fortunately for Europe, only two Eurozone countries show up in that list and only two other Eurozone countries are in the red (Italy and Spain).

The credit default swap market is telling a slightly different story. Out of 15 European and what we call "Fringe European" countries, only 2 have seen the prices for their 5 year CDS drop. Here's the full list:

Click here to go to the live table.

Going back to Cyprus, we might be getting close to the point where their equity market represents a low-risk long opportunity. I say that primarily because it's down 90% since 2007 so how much lower can it go? It's GDP has grown about 50% since then and is projected to rise slightly over the next 4 years. If the GDP estimates hold true, I would expect there to be some recovery in their stock market. Here's the comparison chart of their benchmark equity index against gdp growth (actual and estimated):

Click here to go to the live chart.

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