Ukraine Markets Weekly (January 10, 2017)

 

Macro & politics update

  • Consumer prices increased by 0.9% m/m in December 2016. Year-to-date, consumer prices increased by 12.4%. Consumer prices grew by 13.9% y/y on average in twelve months of 2016./li>
  • Ukraine’s foreign reserves grew by 1.8% m/m in December of 2016, and amounted to USD 15.539 bn as of January 1, 2017. The country’s official reserves increased by 17% or USD 2.2 bn in 2016.
  • From January 4, 2017, the National Bank of Ukraine (NBU) lowered the cap on cash transactions involving individuals, including payments on contract between individuals requiring notarial certification, from the earlier daily ceiling of UAH 150 thousands to UAH 50 thousands (USD 1840 at current NBU rate). Individuals are allowed to carry out any transactions exceeding the UAH 50 thousands ceiling only by way of bank current or deposit account in national currency.

 

Eurobonds overview

Last week, the short-term sovereign Eurobond Ukraine-2019 gained 0.4 cents to be traded at 98.6 cents. The avg. prices on Ukraine-2020, Ukraine-2021, and Ukraine-2022 increased by 0.7 cents to 96.9 cents, 95.9 cents, and 95.0 cents respectively. Ukraine-2023, Ukraine-2024, Ukraine-2025, Ukraine-2026, and Ukraine-2027 gained 0.9 cents on avg. Ukraine-2023 and Ukraine-2024 traded at an avg. price of 93.9 cents and 92.8 cents respectively, whereas Ukraine-2025, Ukraine-2026, and Ukraine-2027 traded at an avg. of 91.8 cents. We think that the price development on the sovereign Eurobonds reflected a positive assessment of the latest monetary and foreign currency regulatory measures of the Government and the National Bank, highlighted by the decision related to Privatbank. Meanwhile, Among our corporate Eurobond picks, DTEK-18 continued gaining, adding 9 bps last week. Ukrainian Railway-21 increased by 1.0 pp., whereas Ukrlandfarming-18 and Avangard-18 lost 21 bps on avg. Ferrexpo-19 remained unchanged. The prices on corporate Eurobonds issues likely follow the strong Government emphasis on infrastructure development, stressed repeatedly by government officials, and which should benefit above all to DTEK and Ukrainian Railway.

Money markets

Over the last week, the average USD/UAH exchange rate decreased by 0.4% w/w to 26.67, closing at the level of UAH 27.02 on Friday. The average daily FX turnover on the interbank market decreased by 15.6% w/w to USD 113 mn, while FX trading volume amounted to USD 141 mn on Friday. The average outstanding amounts held on banks’ correspondent accounts decreased by 19.3% w/w or by UAH 9.7 bn to UAH 40.6 bn. Last week, the short-term Kievprime Overnight (o/n) lost 3 bps to be quoted at 13%; Kievprime 1W, Kievprime 1M, Kievprime 1Y declined by an avg. 24 bps and were quoted at 14.5%, 16.3%, and 18.6% respectively. Kievprime 1M, Kievprime 3M and Kievprime 6M lost 6 bps to be quoted in the range of 18.2%. NBU extended UAH 657 mn refinancing to banks during the week (UAH 5 mn for the previous week), whereas banks acquired NBU deposit certificates worth UAH 86 bn (UAH 119 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 last week. Local banks reduced their holdings of gov. domestic bonds by 1.4% w/w (-UAH 3.5 bn), non-bank corporates by 0.9% w/w (-UAH 219 mn), and non-resident players by 2.8% w/w (-UAH 181 mn). Secondary market activities for gov. bonds were distributed as follows: short-term bonds accounted for 17% of contracts and 1% of market volume, medium-term bonds made 93% and 99% correspondingly. USD denominated bonds represented 14% of contracts and 11% of the overall market volume. The total turnover of local govt. bonds on the “Perspectiva” SE amounted to UAH 113 mn, compared with UAH 5.3 bn for the previous week.

Corporate news

  • Ukraine’s Finance Ministry injected UAH 107 bn in Privatbank’s share capital
  • Ferrexpo’s pellet output down 4.3% y/y, sales up 1.7% y/y in 2016
  • Ukrainian Railway launches USD 600 mn capital investment plan from January 1, 2017