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Ukraine Markets Weekly (January 23, 2017)

 

Macro & politics update

  • Ukraine’s agricultural production increased by 6.1% in 2016, driven by 9.7% expansion in plant growing, on background of a contraction of animal breeding by 2.6%
  • Ukraine’s economy will grow by 1.9% in 2017, while expected to accelerate by 3.2% in 2018, according to the United Nations. Consumer prices are due to increase by 12.7% in 2017, slowing to 8.6% in 2018.
  • Ukraine’s economy has overcome the consequences of the protracted economic crisis. In opposition to the previous years, domestic investment and consumption, rather than external factors laid at the source of growth, according to the economic minister Stepan Kubiv

 

Eurobonds overview

Last week, all sovereign Eurobonds lost in prices. Ukraine-2019, Ukraine-2020, Ukraine-2021, and Ukraine-2022 lost 0.7 cents on avg., whereas Ukraine-2023, Ukraine-2024, Ukraine-2025, and Ukraine-2026 declined by an avg. 0.4 cents. Ukraine-2019, Ukraine-2020, and Ukraine, 2021 traded in the range of 97.0 cents; Ukraine-2022, Ukraine-2023, Ukraine-2024 in the range of 94.7 cents; and Ukraine-2025, Ukraine-2026, and Ukraine-2027 at 93.0 cents on avg. We think that the sovereign Eurobonds prices were dragged down by lack of confidence about a favorable decision of the London Court in favor of Ukraine in the dispute with Russia over the USD 3 bn Eurobonds. Renewed discussions as to the rightfulness of the Government in the bail-in of the Eurobonds of the nationalized Privatbank could have added concerns to investors. Among our corporate Eurobond picks, Ferrexpo-19 gained 1.2 pp., Railway-21 lost 1.3 pp., whereas Ukrlandfarming-18 and Avangard-18 remained unchanged. DTEK-18 was delisted in connection with the exchange of the notes with a new DTEK-2024. We think that the prices on Railway-21 were dumped by raising concerns due to visible struggle over the control of the state company inside the Government.

Money markets

Over the last week, the average USD/UAH exchange rate increased by 0.9% w/w to 27.54, closing at the level of UAH 27.43 on Friday. The average daily FX turnover on the interbank market decreased by 25.5% w/w to USD 144 mn, while FX trading volume amounted to USD 135 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts increased by 2.2% w/w or by UAH 1.0 bn to UAH 48.0 bn. Last week, the quotations on all Kievprime indexes remained unchanged. The short-term Kievprime Overnight (o/n) was quoted at 13.0%, Kievprime 1W at 14.5%, and Kievprime 1M at 16.1% on avg. Kievprime 2M and Kievprime 3M quoted at 18.0%; Kievprime 6M and Kievprime 1Y were quoted at 19.0%. NBU extended UAH 464 mn refinancing to banks during the week (UAH 499 mn for the previous week), whereas banks acquired NBU deposit certificates worth UAH 54 bn (UAH 53 bn during the previous week).

Local bond markets

The Finance Ministry made no placement of domestic bonds last week. NBU made no operations with gov. domestic bonds, whereas Local Banks and Non-Bank Corporates increased their gov. bond holding by 0.3% (+UAH 747 mn) and 0.4% (+UAH 89 mn) respectively. Non-resident players reduced their holding by 1.5% (-UAH 100 mn). Secondary market activities for gov. bonds were distributed as following: short-term bonds accounted for 27% of contracts and 34% of market volume, medium-term bonds made 73% and 66% correspondingly. USD denominated bonds represented 43% of contracts and 55% of the overall market volume. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 2.4 bn, compared with UAH 1.9 bn for the previous week.

Corporate news

  • Ukrzaliznytsia became independent from Transport and Infrastructure Ministry
  • Privatbank’s note holders seek arrest of the bank’s foreign correspondent accounts
  • Metinvest secured English Court approval to meetings of Note holders and PXF Lenders
  • Kernel Holding launches debut USD 650 mn Eurobond roadshow