For Immediate Release
Chicago, IL – April 1, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Citigroup Inc. (C), General Electric (GE), FedEx (FDX), Caterpillar, Inc. (CAT) and Goldman Sachs (GS).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Thursday’s Analyst Blog:
What Lessons Has Cyprus Taught Us?
Last Saturday, Cyprus finally reached an agreement on the terms of its bailout with a group of international lenders, consisting of the IMF, ECB and EU. The original set of terms was a bitter pill to swallow.
Particularly unpalatable was the proposal to tax insured deposits at 6.75%. The final agreement eliminates this clause altogether.
Ultimately, uninsured depositors will have to bear the entire burden of rescuing Cyprus’s two beleaguered banks – Cyprus Popular Bank and Bank of Cyprus. In order to receive the euro 10 billion ($13 billion) bailout package, Cyprus will have to itself put up a substantial amount. The Popular Bank of Cyprus, also known as Laiki Bank, will be closed. Its good assets and insured deposits will be transferred to Bank of Cyprus.
Deposits above euro 1,00,000 will be utilized to fund the amount to be paid by Cyprus. These frozen deposits are expected to amount to euro 4.2 billion ($5.5 billion) and depositors could lose up to 30%-40%. This is substantially higher than the originally proposed rate of 9.9% on these deposits.
Incidentally, most of these deposits are from Russia. Weak financial regulation and low corporate taxes have turned Cyprus into a destination for funds from affluent individuals and businesses from all over the world. This is why the country is hugely dependent on its financial sector. In fact, Russian funds amount to $31 billion in bank deposits. This figure is particularly relevant when compared to Cyprus’ GDP of $25 billion.
However, all this has come to an end thanks to the terms of the bailout. The fact that foreign depositors will be paying for the country’s bailout has effectively ended Cyprus’ lucrative offshore banking sector. This will lead to a huge loss of income, a rise in unemployment and a reduction in GDP. Brokerage agency Exotix has forecast a 10% decline in GDP this year itself.
Further action would mean going against the very spirit of the European Union. This would mean more trouble for Cyprus’ economy, already facing a downgrade from rating agency Fitch. It would also send a negative signal to those parking funds in other troubled euro zone countries like Spain, Italy and Greece.
What the Cyprus deal illustrates is that the Eurozone still has economic issues which remain a long-term concern. In any case, the rest of the region is anything but in the pink of economic health. This is particularly relevant to U.S. companies with large exposure to the Eurozone. According to Citi Research, a division of Citigroup Inc. (C), as of 2010 several large U.S. companies drew significant revenues from the region.
These include the likes of General Electric (GE), among many others. Earlier this month, FedEx (FDX) lowered its earnings forecast, saying that it had been affected by the global economic situation. Meanwhile, Caterpillar, Inc. (CAT), a significant indicator of the health of the world’s economy, said monthly sales had declined significantly.
According to Goldman Sachs (GS), around 50% of international sales of US companies can be attributed to Europe. Until now, share prices have been unaffected by the precarious European situation combined with such heavy exposure. However, markets have been sensitive on occasion. Indices had declined after Jeroen Dijsselbloem, head of the Eurogroup of Eurozone finance ministers, said that the approach used in Cyprus would be used in other countries facing similar problems.
Of course, stocks recovered when he said: “Cyprus is a specific case with exceptional challenges,” but such concerns linger in the background. And capital controls cannot be one of them. This would go against the very spirit of the currency union and lead to a further loss of confidence. The Cyprus pact has put the brakes on a greater crisis for now. But, surely, the Eurozone will have to find a more permanent solution to its economic malaise.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: https://twitter.com/zacksresearch
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339
More From Zacks.com