National Electricity Regulation Committee decided to leave the electricity prices for chemical and steel industry intact at least till March 2010. Electricity prices remain stable for these industries since October 2008. Currently, depending on volume of consumption these industries pay UAH 0.4221 per kWt/h or UAH 0.5624 per kWt/h.
Despite promises to reform its energy sector and increase tariffs to cost-covering levels the practices of cross-subsidization in the energy sector persist in Ukraine.
Friday, January 29, 2010
Thursday, January 28, 2010
Ukraine to conduct extraordinary OVGZ placement
The Ministry of Finance will be holding its next placement of Ukraine's domestic bonds (OVGZ) today (Thursday, January 28) and offer two bonds series with maturity dates July 28, 2010 and January 26, 2011.
Accoridng to the view of Astrum investment company, the extraordinary placement announcement is down to the government’s need to attract funds in the current month. At the same time, MinFin is attempting to attract funds without any increase in yields. At this current auction, the Ministry will be selling not so popular bond series – 6-month and 12-month OVGZs. It is hard to predict the yields level and the volume of the placement.
It is highly possible that that the government has reached an agreement with a number of banks. However, to Astrum’s opinion, market demand will be moderate due to the fact that major players are waiting for the February placements and the expected yield increase for 2-year and 3-year OVGZs.
Accoridng to the view of Astrum investment company, the extraordinary placement announcement is down to the government’s need to attract funds in the current month. At the same time, MinFin is attempting to attract funds without any increase in yields. At this current auction, the Ministry will be selling not so popular bond series – 6-month and 12-month OVGZs. It is hard to predict the yields level and the volume of the placement.
It is highly possible that that the government has reached an agreement with a number of banks. However, to Astrum’s opinion, market demand will be moderate due to the fact that major players are waiting for the February placements and the expected yield increase for 2-year and 3-year OVGZs.
Wednesday, January 27, 2010
JKX (JKX LN) to raise 37.8 mln pounds to fund development
Reuters reports that Russia and Ukraine-focused oil producer JKX Oil & Gas (JKX.L) plans to raise 37.8 million pounds ($61 million) through a placing of new shares to fund the development of reserves to boost production.
The FTSE 250 company said the proceeds of the placing would finance the building of a second rig at its Rudenkovskoye field and a liquefied petroleum gas (LPG) facility, both in Ukraine, and help it continue its well workover programme in Russia.
It added that the additional cash would also enable it to maintain the ability to make selective acquisitions.
JKX is targeting production of 20,000 barrels of oil equivalent per day in 2011 up from 13,657 bpd in the three months to the end of September 2009.
It said the $11 million LPG facility would enable it to extract increased value from its Ukrainian gas production. To date, the Russian workover programme was "encouraging" with the first sales of gas expected by the end of this year, it added.
The placing, being conducted through an accelerated bookbuilding by Oriel Securities and Brewin Dolphin was priced at 265 pence per share, a discount of 4.7 percent to the closing price on Jan. 25.
The placing shares will represent about 9.1 percent of the existing ordinary shares or 8.3 percent of the enlarged share capital.
Shares in JKX were down 3.3 percent to 269 pence by 0846 GMT, having doubled in value over the last twelve months.
The FTSE 250 company said the proceeds of the placing would finance the building of a second rig at its Rudenkovskoye field and a liquefied petroleum gas (LPG) facility, both in Ukraine, and help it continue its well workover programme in Russia.
It added that the additional cash would also enable it to maintain the ability to make selective acquisitions.
JKX is targeting production of 20,000 barrels of oil equivalent per day in 2011 up from 13,657 bpd in the three months to the end of September 2009.
It said the $11 million LPG facility would enable it to extract increased value from its Ukrainian gas production. To date, the Russian workover programme was "encouraging" with the first sales of gas expected by the end of this year, it added.
The placing, being conducted through an accelerated bookbuilding by Oriel Securities and Brewin Dolphin was priced at 265 pence per share, a discount of 4.7 percent to the closing price on Jan. 25.
The placing shares will represent about 9.1 percent of the existing ordinary shares or 8.3 percent of the enlarged share capital.
Shares in JKX were down 3.3 percent to 269 pence by 0846 GMT, having doubled in value over the last twelve months.
Tuesday, January 26, 2010
Two Ukrainians made it to FT's 50 emerging market leaders
Rinat Akhmetov and Viktor Pinchuk (who likes to be written as Victor though) are two Ukrainians who made it to the top 50 emerging market business leaders chosen by the Financial Times. Certainly, Rinat Akhmetov and Viktor Pinchuk are the most internationally visible and richest businessmen in Ukraine. Both of them have invested significantly lately to gain social and international recognition, which is definitely reflected in their being included in the list. Moreover, if compared to Russian oligarchs Ukraine's representatives are somewhat poorer they may boast more independence from the state.
Monday, January 25, 2010
30 billions to pay in 2010
According to Sigma Bleyzer fund leading analyst Oleg Ustenko, government and private Ukrainian entities have to repay from 20 to 30 billions USD to their foreign lenders during the current year.
Surely large part of this amount will undergo restructuring. Nevertheless the remaining part will create significant devaluation pressure on grivna. Considering that each month National Bank of Ukraine lets the government take USD 500-600 mln from NBU's foreign currency reserves, we expect that Ukrainian currency will loose part of its value in 2010.
Despite the fact that experts do not foresee significant current account deficit in this year, capital account may be the source of negative shock. Debt pressure is one of the main risks in 2010. Roughly speaking, total Ukrainian debt is now almost equal to GDP.
Surely large part of this amount will undergo restructuring. Nevertheless the remaining part will create significant devaluation pressure on grivna. Considering that each month National Bank of Ukraine lets the government take USD 500-600 mln from NBU's foreign currency reserves, we expect that Ukrainian currency will loose part of its value in 2010.
Despite the fact that experts do not foresee significant current account deficit in this year, capital account may be the source of negative shock. Debt pressure is one of the main risks in 2010. Roughly speaking, total Ukrainian debt is now almost equal to GDP.
Land plot prices near Kiev
Land plot price in Kiev oblast has decreased by 25% during the 2009. In January 2010 the prices were up 0.5%, which is basically in the error range, signifying lack of activity on the market in January. We publish the list of prices in various rayons of Kiev oblast in $ per "sotka". Sotka is a usual unit of measurement for small land plots in Ukraine and is equal to 0.01 of Hectare. Acre consists of about 42 sotkas.
These prices are indicative only as the land plot prices vary greatly within one rayon depending on whether it is closed to infrastructure, highway etc. Also it is only the official asking prices, which may very well drop significantly once the deals are done.
Dava of SV Development
These prices are indicative only as the land plot prices vary greatly within one rayon depending on whether it is closed to infrastructure, highway etc. Also it is only the official asking prices, which may very well drop significantly once the deals are done.
Kiev-Sviatoshyn - $6 351/sotka;
Obukhov - $4 584/sotka;
Boryspil - $4 085/sotka;
Vyshgorod - $2 908/sotka;
Brovary - $2 873/sotka;
Boryspil - $4 085/sotka;
Vyshgorod - $2 908/sotka;
Brovary - $2 873/sotka;
Vasylkiv - $2 504/sotka;
Borodyansky - $1 833/sotka;
Makarov - $1 856/sotka;
Kaharlyk - $1 434/sotka;
Fastov - $1 152/sotka;
Bila Tserkva - $1 177/sotka;
Baryshiv - $1 109/sotka;
Ivankiv - $1 068/sotka;
Pereyaslav - $1 047/sotka.
Borodyansky - $1 833/sotka;
Makarov - $1 856/sotka;
Kaharlyk - $1 434/sotka;
Fastov - $1 152/sotka;
Bila Tserkva - $1 177/sotka;
Baryshiv - $1 109/sotka;
Ivankiv - $1 068/sotka;
Pereyaslav - $1 047/sotka.
Dava of SV Development
Friday, January 22, 2010
Presidential elections: interim reflections
Elections were fair and free. There were not many mechanisms for fraud in the electoral law this time, because both camps of the front runners were not sure that they can exert enough influence to control these mechanisms to their own benefit.
Big surprise was the amount of votes that a relatively "new" face of Sergei Tigipko won - 13%. Former NBU Head and ex-Vice-Prime Minister refuses to ask his voters to support one of the candidates, making a bet on their support during local elections in May 2010 (perhaps coinciding with early parliamentary elections). However, his refusal to support other candidates may be due to his electoral base being relatively new. That is it may not be likely to follow Tigipko's call to support one of the front-runners, but will only deem Mr. Tigipko to be a technical candidate thus reducing trust in him. That in turn can diminish his future May success on local elections.
Certainly, Ms Tymoshenko, one of the front-runners, who loses about 10% to Mr Yanukovich, is in a difficult position. Her chances of victory are slim. One of the interesting scenarios for her would be to step down from electoral battle and to ask her supporters to vote for Mr. Tigipko, thus making him a winner. That would make Tigipko a president, remove Mr Yanukovich from the playing field as well as preserve Yulia Tymoshenko as a Prime Minister of the country - a post that might be prefereable to weak presidential office. That scenario is just one of the many and is not very likely, but... a really interesting one.
Second round of elections is expected on February 7 with a new president stepping into the office by March 29 should everything go on schedule. It is interesting to note lack of published polls predicting who the victor of the second round may be under different scenarios and what turnout to expect.
Big surprise was the amount of votes that a relatively "new" face of Sergei Tigipko won - 13%. Former NBU Head and ex-Vice-Prime Minister refuses to ask his voters to support one of the candidates, making a bet on their support during local elections in May 2010 (perhaps coinciding with early parliamentary elections). However, his refusal to support other candidates may be due to his electoral base being relatively new. That is it may not be likely to follow Tigipko's call to support one of the front-runners, but will only deem Mr. Tigipko to be a technical candidate thus reducing trust in him. That in turn can diminish his future May success on local elections.
Certainly, Ms Tymoshenko, one of the front-runners, who loses about 10% to Mr Yanukovich, is in a difficult position. Her chances of victory are slim. One of the interesting scenarios for her would be to step down from electoral battle and to ask her supporters to vote for Mr. Tigipko, thus making him a winner. That would make Tigipko a president, remove Mr Yanukovich from the playing field as well as preserve Yulia Tymoshenko as a Prime Minister of the country - a post that might be prefereable to weak presidential office. That scenario is just one of the many and is not very likely, but... a really interesting one.
Second round of elections is expected on February 7 with a new president stepping into the office by March 29 should everything go on schedule. It is interesting to note lack of published polls predicting who the victor of the second round may be under different scenarios and what turnout to expect.
Dead gas consortium to rise?
Victor Yanukovich, possibly next president of Ukraine, made a statement regarding so-called gas consortium. According to Interfax news agency he said that he will make a proposal to create a consortium to manage existing gas transit system in Ukraine, and to conduct system’s reconstruction in order to raise the volumes of gas transit.
These goals for the consortium seem to have little to do with reality. First, raising volumes of gas transit doesn’t depend on Ukrainians’ efforts now. Due to economic downturn, the demand for Russian gas in Europe is falling. In 2009, only 95 billions of cubic meters of gas was transported from Russia through Ukraine towards EU, which is 24.4 bns lower than in previous year. Total capacity of Ukrainian gas transit system is at least 140 bns per year. Obviously, it is not necessary to expand these capacities, especially if we consider that Gazprom’s gas production is falling down.
Second. The funniest thing here is that the consortium had already been created long time ago, during late Kuchma’s era. Literally the goal for it was the same. However, the child was born dead – the consortium didn’t manage to fulfill the role of operating center for Ukrainian gas pipeline system.
These goals for the consortium seem to have little to do with reality. First, raising volumes of gas transit doesn’t depend on Ukrainians’ efforts now. Due to economic downturn, the demand for Russian gas in Europe is falling. In 2009, only 95 billions of cubic meters of gas was transported from Russia through Ukraine towards EU, which is 24.4 bns lower than in previous year. Total capacity of Ukrainian gas transit system is at least 140 bns per year. Obviously, it is not necessary to expand these capacities, especially if we consider that Gazprom’s gas production is falling down.
Second. The funniest thing here is that the consortium had already been created long time ago, during late Kuchma’s era. Literally the goal for it was the same. However, the child was born dead – the consortium didn’t manage to fulfill the role of operating center for Ukrainian gas pipeline system.
Thursday, January 21, 2010
Creditor's of Ukraine's defaulted banks can expect 40% recovery
Standard & Poor's Ratings Services said today that although recovery rates for creditors of defaulted banks in Kazakhstan, Russia, and Ukraine (KRU) have historically been muted, they could improve with support from the state.
"We believe that recoveries could be restricted and unpredictable, largely because of limited bank supervision and what we see as arbitrary frameworks for bankruptcy and bank restructuring in KRU," said Standard & Poor's credit analyst Sergey Voronenko. "In our view, this situation may be exacerbated by the approach of the banks' management and what appears to be asset stripping before default, as has been alleged in some recent bank liquidations. These aspects together with other factors have historically constrained our ratings on KRU banks."
"We expect the average recovery prospects for creditors to be less than 40% through the cycle, with strong disparities in individual cases," added Standard & Poor's credit analyst Ekaterina Trofimova. "This is despite some progress, most notably in Russia, from the previous decade. Recoveries may be even lower in 2010 and 2011, owing to the likely continuation of weak economic conditions in KRU.”
Source
"We believe that recoveries could be restricted and unpredictable, largely because of limited bank supervision and what we see as arbitrary frameworks for bankruptcy and bank restructuring in KRU," said Standard & Poor's credit analyst Sergey Voronenko. "In our view, this situation may be exacerbated by the approach of the banks' management and what appears to be asset stripping before default, as has been alleged in some recent bank liquidations. These aspects together with other factors have historically constrained our ratings on KRU banks."
"We expect the average recovery prospects for creditors to be less than 40% through the cycle, with strong disparities in individual cases," added Standard & Poor's credit analyst Ekaterina Trofimova. "This is despite some progress, most notably in Russia, from the previous decade. Recoveries may be even lower in 2010 and 2011, owing to the likely continuation of weak economic conditions in KRU.”
Source
Igor Kolomoisky buys TV stations from CME
One of the leading Ukrainian TV stations 1+1 as well as Kino TV station was bought by Igor Kolomoisky from Central European Media Enterprises Ltd.(CME) for $300 mln plus $19 mln for settling the transaction. First payment of $30 mln should be paid before February 1, 2010 and the rest should be paid by April 2010.
It looks like buying a leading TV channel by one of Ukrainian oligarchs just prior to the second round of presidential elections may be indeed a strategic investment.
Ukraine: it is somewhere between Togo and Liberia
Heritage Foundation and Wall Street Journal publishes 2010 Index of Economic Freedom. Ukraine occupies proud last place out of all European countries and 162 out of 179 evaluated countries, finding itself just between Togo and Liberia. Ukraine gets high scores for Fiscal, Monetary and Trade Freedom, but is ranked quite low in Business, Investment, Financial freedoms. Also Ukraine gets low scores on Property rights protection and Freedom from Corruption. Source
Apparently biggest opportunity for Ukraine lies in improving its business climate, property rights protection and fighting corruption. These tasks are no surprise and have been apparent for years, however, they have never been popular with Ukraine's political elite.
Apparently biggest opportunity for Ukraine lies in improving its business climate, property rights protection and fighting corruption. These tasks are no surprise and have been apparent for years, however, they have never been popular with Ukraine's political elite.
Wednesday, January 20, 2010
Post-election redistribution of property: is it coming?
Presidential elections in Ukraine will stop the times of duality in Ukrainian power. The conflict between Orange revolution leaders Yulia Tymoshenko and Viktor Yushchenko are over whatever the result of the election. It is likely that early parliamentary and local elections will cement the victory of a presidential winner, whoever it will be. Once the power gets consolidated in the hands of one political camp the question is - will the other camp suffer or rather how exactly will it suffer.
Certainly, many bureaucrats will lose their positions due to elections (more in case of Yanukovich victory, provided YuliaTymoshenko already controls Cabinet of Ministers and is rather influential with many courts). But it is likely that some property is also destined to change hands. Many oligarchic businesses were built on shaky ground of discretionary bureaucratic decisions with respect to licenses, permits, access to monopolistic markets etc. Those kinds of businesses are likely to suffer after the president gets settled in his or her seat.
One of the likely targets in case of the Tymoshenko win will be Mr. Firtash, who has already lost his intermediary business in gas trade between Russia and Ukraine and is now trying to defend remnants of his business empire. Today OstChem Ukraine publishes a press-release that its stake in Crimean Titan enterprise is under threat due to government's decisions, which may lead to raider attack. Other likely targets of the second round of re-privatization may be in Mr. Pinchuk's business empire.
After Orange revolution Yuliya Tymoshenko has initiated reprivatization process, which came to a halt after a loud sale of Kryvorizhstal' plant to Arcelor Mittal. Kryvorizhstal' was privatized by a consortium of Viktor Pinchuk and Rinat Akhmetov for fraction of the market price.
In case Viktor Yanukovich wins property redistribution may also be likely, but it is less probable, provided his camp has suffered from it in 2005 and ardently protested any kinds of privatization revision. However, being the victim of the process in opposition is one thing - it is much harder to stay away from it once the opportunity is there.
Certainly, many bureaucrats will lose their positions due to elections (more in case of Yanukovich victory, provided YuliaTymoshenko already controls Cabinet of Ministers and is rather influential with many courts). But it is likely that some property is also destined to change hands. Many oligarchic businesses were built on shaky ground of discretionary bureaucratic decisions with respect to licenses, permits, access to monopolistic markets etc. Those kinds of businesses are likely to suffer after the president gets settled in his or her seat.
One of the likely targets in case of the Tymoshenko win will be Mr. Firtash, who has already lost his intermediary business in gas trade between Russia and Ukraine and is now trying to defend remnants of his business empire. Today OstChem Ukraine publishes a press-release that its stake in Crimean Titan enterprise is under threat due to government's decisions, which may lead to raider attack. Other likely targets of the second round of re-privatization may be in Mr. Pinchuk's business empire.
After Orange revolution Yuliya Tymoshenko has initiated reprivatization process, which came to a halt after a loud sale of Kryvorizhstal' plant to Arcelor Mittal. Kryvorizhstal' was privatized by a consortium of Viktor Pinchuk and Rinat Akhmetov for fraction of the market price.
In case Viktor Yanukovich wins property redistribution may also be likely, but it is less probable, provided his camp has suffered from it in 2005 and ardently protested any kinds of privatization revision. However, being the victim of the process in opposition is one thing - it is much harder to stay away from it once the opportunity is there.
Tuesday, January 19, 2010
Steelmakers keep losses low
Ukrainian steelmakers' 2009 preliminary net loss reached UAH 5bln (USD 600mln), down from the 2008 net income of UAH 17bln (approx. USD 3bln), according to Vasiliy Kharahulah, CEO of the Metallurgprom Association. We consider this a comparatively good result, taking to account the fact that 2009 sales dramaticall dropped (almost by 37%).
According to opinion of Astrum investment company, the drop of rolled steel output by 16% and rolled steel prices by 24% (in hryvnia terms) will result in a 36% drop of Ukrainian steelmakers’ net sales in 2009. Expert expect Azovstal, ArcelorMittal Kryvyi Rih and Mariupol Illich will be the only profitable steelmakers in 2009 in terms of net income.
In 2010, growth is predicted: net sales should grow by 39%, driven by output growth by 11% and prices growth of 25%. The 2010 net income margin should be 4%-6% on average.
We would like to outline that it is sharp devaluation of grivna gave a nice chance to steelmakers to increase their profitability and keep the losses low. Ukrainian currency lost almost 40% of its value since the beginning of financial crisis, softening the effect global downturn on local exporters.
Steelmakers are number one Ukraine’s exporting sector, traditionally accounting for about 40% export sales. This is compatible to share of oil in Russia’s exports.
According to opinion of Astrum investment company, the drop of rolled steel output by 16% and rolled steel prices by 24% (in hryvnia terms) will result in a 36% drop of Ukrainian steelmakers’ net sales in 2009. Expert expect Azovstal, ArcelorMittal Kryvyi Rih and Mariupol Illich will be the only profitable steelmakers in 2009 in terms of net income.
In 2010, growth is predicted: net sales should grow by 39%, driven by output growth by 11% and prices growth of 25%. The 2010 net income margin should be 4%-6% on average.
We would like to outline that it is sharp devaluation of grivna gave a nice chance to steelmakers to increase their profitability and keep the losses low. Ukrainian currency lost almost 40% of its value since the beginning of financial crisis, softening the effect global downturn on local exporters.
Steelmakers are number one Ukraine’s exporting sector, traditionally accounting for about 40% export sales. This is compatible to share of oil in Russia’s exports.
Industrial production down 21.9% in 2009
Statistics Committee presented the data on industrial production in 2009. It appears to be down 21,9% compared to the previous year. Chemical industry is down 23.2% and steel industry srinked by 26.6%, both industries, however, stabilized in the end of the year. Volyn' region suffered the highest "de-industrialization" with industrial production falling 48.3% (however, not many people were suspecting that there was much industry in Volyn' oblast in the first place).
The growing production in 2009 was noticed in gas extraction, meat, sunflower oil, gasoline and vodka production. Source
The growing production in 2009 was noticed in gas extraction, meat, sunflower oil, gasoline and vodka production. Source
Monday, January 18, 2010
Business expectations turn to positive
Research by National bank of Ukraine indicated that expectations of top management of Ukrainian enterprises had shifted to modest positive zone in 4th quarter of 2009. In detail, 10% of business entities expect sales to rise in next 12 months, compared to 8% in 2nd and 3rd quarter of 2009. Also, the share of those who expect sales to go down narrowed to 24%.
For the year 2010, business sector expects inflation at the level of 15.1%. It is an optimistic estimate, considering rising gas prices and tariffs for heating etc. Also almost 60% expect devaluation of grivna in this year.
Experts outline that the balance of general expectations about the economic and financial state of companies in the next 12 months turned from a negative 2% in 3Q09 to positive 6.6% in 4Q09, becoming positive for the first time since the crisis entered its harsh stage in 4Q08.
The NBU has published its survey of business expectations in 4Q09. The survey is based on interviews with 1,245 companies across Ukraine, and provides a good representation of the Ukrainian business community.
For the year 2010, business sector expects inflation at the level of 15.1%. It is an optimistic estimate, considering rising gas prices and tariffs for heating etc. Also almost 60% expect devaluation of grivna in this year.
Experts outline that the balance of general expectations about the economic and financial state of companies in the next 12 months turned from a negative 2% in 3Q09 to positive 6.6% in 4Q09, becoming positive for the first time since the crisis entered its harsh stage in 4Q08.
The NBU has published its survey of business expectations in 4Q09. The survey is based on interviews with 1,245 companies across Ukraine, and provides a good representation of the Ukrainian business community.
Ukraine's stocks: what to wait for after presidential elections
Here are some quotes from Market Watch article on possible impact of elections on Ukraine's stocksi. The main idea of the article is that elections will bring political stability and that Tymoshenko's win will bring such a stability faster for she has to spend less time to consolidate power than Yanukovich, who'd have to fill the whole power structure of Ukraine with new personnel.
"We expect a difficult political battle during and after the election to trigger a new round of negative news flow," said Anastasia Golovach of Renaissance Capital in Kiev. "Investors could decide to sell some instruments [stocks and bonds] because the stabilization of the political situation in unlikely in the short term," she said.
Ukraine's benchmark PFTS stock index rose 90% in hryvna terms last year after tumbling 74% in 2008. In dollar terms, the index rallied 83% in 2009, just as much as it dropped the previous year. Still, over the last decade, the index has surged 858% in dollar terms and 1,366% in hryvna terms, according to data from the PFTS Stock Exchange.
"Liquidity is very poor here, but if we have a stable political situation and a stable exchange rate for a few months, investors will start looking at this country," Abromavicius said.
"We expect a difficult political battle during and after the election to trigger a new round of negative news flow," said Anastasia Golovach of Renaissance Capital in Kiev. "Investors could decide to sell some instruments [stocks and bonds] because the stabilization of the political situation in unlikely in the short term," she said.
Ukraine's benchmark PFTS stock index rose 90% in hryvna terms last year after tumbling 74% in 2008. In dollar terms, the index rallied 83% in 2009, just as much as it dropped the previous year. Still, over the last decade, the index has surged 858% in dollar terms and 1,366% in hryvna terms, according to data from the PFTS Stock Exchange.
"Liquidity is very poor here, but if we have a stable political situation and a stable exchange rate for a few months, investors will start looking at this country," Abromavicius said.
The market capitalization of the PFTS, which consists of 20 companies, was $10.1 billion last year. The sectors that stand out are steel and iron ore, utilities and banks.
Sunday, January 17, 2010
Freight turnover is down 22% in 2009
Freight turnover is down 22% in 2009 compared to 2008 says State Statistics Committee. Most of the freight in Ukraine is transported by railway and pipelines. While railways mainly service steel sector, pipeline transport's main client is Russian transit gas going to Europe. Both these sectors were hard hit in 2009: railway freight turnover contracted by 24% and pipeline freight turnover by 21%. These numbers reflect downfall in steel production and contraction of the Russian transit gas volumes going through Ukraine.
Source.
Source.
Saturday, January 16, 2010
Ukraine's retail down 20% in 2009
State Statistics Committee publishes the info on retail trade and restaurant business turnover in 2009. It appears that the number is down 20% in 2009 compared to 2008. In 2009 turnover in the retail sector was UAH 229.9 bn, which is about $28.5 bn at the current exchange rate. It is likely that the downfall in retail turnover is not over yet and is to continue in 2010.
The city of Kyiv is down 22%. Donetsk oblast is the leader in retail contraction - 26%, while Kyiv oblast (excluding Kyiv) turned out to be the most resilient to contraction - only 9.8% down.
Source
The city of Kyiv is down 22%. Donetsk oblast is the leader in retail contraction - 26%, while Kyiv oblast (excluding Kyiv) turned out to be the most resilient to contraction - only 9.8% down.
Source
Friday, January 15, 2010
Sell-side firm forecasts grivna exchange rate for 2010
Dragon Capital, one of the largest Ukrainian investment companies, forecasts foreign exchange rate to be 7.5 grivna for 1 USD at the end of 2010. UR sees this prediction as too optimistic, considering recent sudden and sharp fluctuation of Ukrainian currency rate after the end of New Year vacations. Since 7th of December, grivna has lost almost 2.5% of its value against dollar during 4 days, reaching its September’09 levels – 8.20. Only due to intensive market interventions by National Bank of Ukraine, hryvna/USD rate is now 8.07.
These fluctuations are the reason for doubts regarding the peaceful future of grivna in 2010. According to Dragon’s forecast, the revalutaion will be supported by inflow of capital (strange assumption, considering worsening of financial condition of Ukrainian leading corporations) and economic growth (almost eqal to zero).
What was left out in Dragon Capital's assumptions is growth of public debt, worsening of quality of credit portfolios of Ukrainian banks, and predicted defaults of construction companies. All these factors, as well as possibility of sovereign defaults of emerging countries can cause zero capital inflow in Ukraine in 2010.
Regarding IMF loans, it is possible to predict that Fund will provide limited loans sufficient only for preserving national currency from sharp devaluation. Restriction of cooperation with the IMF in 2010 will be caused by overwhelming populism of Ukrainian government with its desire to control NBU and currency reserves.
To summarize, Dragon capital’s opinion represents the desired scenario for a sell-side company. Nevertheless, it seems to us in UR that the map of risks for Ukraine is a bit different.
These fluctuations are the reason for doubts regarding the peaceful future of grivna in 2010. According to Dragon’s forecast, the revalutaion will be supported by inflow of capital (strange assumption, considering worsening of financial condition of Ukrainian leading corporations) and economic growth (almost eqal to zero).
What was left out in Dragon Capital's assumptions is growth of public debt, worsening of quality of credit portfolios of Ukrainian banks, and predicted defaults of construction companies. All these factors, as well as possibility of sovereign defaults of emerging countries can cause zero capital inflow in Ukraine in 2010.
Regarding IMF loans, it is possible to predict that Fund will provide limited loans sufficient only for preserving national currency from sharp devaluation. Restriction of cooperation with the IMF in 2010 will be caused by overwhelming populism of Ukrainian government with its desire to control NBU and currency reserves.
To summarize, Dragon capital’s opinion represents the desired scenario for a sell-side company. Nevertheless, it seems to us in UR that the map of risks for Ukraine is a bit different.
Thursday, January 14, 2010
Deficit of Ukraine's foreign trade in goods over eleven months shrinks by 3.7 times
The deficit of Ukraine's foreign trade in goods January through November 2009 was estimated at $4.815 billion, which was 3.7 times down on the same period in 2008 ('minus' $17.857 billion), the State Statistics Committee reported.
The export of goods in the eleven months was estimated to be worth $35.603 billion (56.6% of the January-November 2008 period), and imports amounted to $40.418 billion (50.1%).
As the State Statistics Committee said, the deficit of Ukraine's foreign trade in goods was due to trade in certain groups of commodities – energy materials, oil and fuel ('minus' $11.2 billion), pharmaceuticals ('minus' $1.743 billion), and polymers and plastic materials ('minus' $1.583 billion).
The ratio of coverage of imports by exports January through November 2009 was 0.88, whereas in the same period last year it was 0.78. Source.
The export of goods in the eleven months was estimated to be worth $35.603 billion (56.6% of the January-November 2008 period), and imports amounted to $40.418 billion (50.1%).
As the State Statistics Committee said, the deficit of Ukraine's foreign trade in goods was due to trade in certain groups of commodities – energy materials, oil and fuel ('minus' $11.2 billion), pharmaceuticals ('minus' $1.743 billion), and polymers and plastic materials ('minus' $1.583 billion).
The ratio of coverage of imports by exports January through November 2009 was 0.88, whereas in the same period last year it was 0.78. Source.
Wednesday, January 13, 2010
50% plus two stock of ISD sold to consortium of investors
Alexander Katunin, the owner of Swiss metal trader Carbofer Group and the former co-owner of Russia's Evraz Group, together with a group of financial investors and with the participation of Russia's Vnesheconombank (VEB), has purchased a controlling interest in Donetsk-based Industrial Union of Donbas (IUD) Corporation. The new partners have helped the company to strengthen its position on the global market, the IUD said in a press release.
Alexander Katunin (who was a co-founder and a shareholder of Evraz Group until 2004), an owner of the international steel and iron products trader Carbofer Group S.A. as well as logistic and production companies, have bought a 50% plus two stocks package in the IUD. A 49.99% share still belongs to Serhiy Taruta and Oleh Mkrtchan," the press release reads.
The IUD, founded in 1995, is an integrated holding company that owns or manages stakes in mining and metals enterprises. The group's core assets are the Alchevsk Iron & Steel Works (AMK), Alchevsk Coke-Chemical Plant and Dzerzhynsk Iron & Steel Works (DMK) in Ukraine, as well as Dunaferr in Hungary, and ISD-Huta Czestochowa in Poland. Source.
Alexander Katunin (who was a co-founder and a shareholder of Evraz Group until 2004), an owner of the international steel and iron products trader Carbofer Group S.A. as well as logistic and production companies, have bought a 50% plus two stocks package in the IUD. A 49.99% share still belongs to Serhiy Taruta and Oleh Mkrtchan," the press release reads.
The IUD, founded in 1995, is an integrated holding company that owns or manages stakes in mining and metals enterprises. The group's core assets are the Alchevsk Iron & Steel Works (AMK), Alchevsk Coke-Chemical Plant and Dzerzhynsk Iron & Steel Works (DMK) in Ukraine, as well as Dunaferr in Hungary, and ISD-Huta Czestochowa in Poland. Source.
Monday, January 11, 2010
Naftogaz to have $4 bn deficit in 2010?
According to prediential representative on energy security Mr. Sokolovsky Naftogaz should have about $4 bn deficit in 2010. In a simple addition substraction game he told that in 2010 Naftogaz should pay Russia about $10 bn for gas, while Ukrainian market is forecasted to generate in payments about $5 bn. Where will the other $5 bn come? Mr. Sokolovsky thinks that there will be a contraction in gas demand for about $1 bn. In the end we have 10-5-1=4, which is $4 bn that Naftogaz will miss. Source.
Sunday, January 10, 2010
FDI into Ukraine drops almost trifold in 2009
Ukraine has been hard hit by the credit crunch and the crisis. As a result of that FDI into Ukraine drops almost trifold in first 9 months of 2009. From $8 bn in the first 9 months of 2008 to $2.97 bn in the same period of 2009. It is the city of Kyiv that got most of the FDI flow, receiving $1.2 bn. Other top performers include Kharkiv, Lugansk, Lviv and Kyiv oblast. Disinvestment was occured in Chernigiv and Poltave oblasts.
During the times of independence Ukraine got $837.5 of FDI per capita, provided the population shrinks that number has a built-in improvement trend... Source.
Wednesday, January 6, 2010
Cabinet of Ministers pumps up control over prices in pharmaceutical industry
During the meeting with reps of pharmaceutical business in Ukraine Yulia Tymoshenko, prime minister of Ukraine, ordered to create a coordination commission to check the fairness of price-setting in pharmaceutical industry. As of now no concept of price-setting apart from vague remarks of the prime minister has been suggested. However, prime minister told that if the price-setting is found unfair the licenses of drug stores will be revoked for good.
The commission will consist of reps of the Tax administration, Anti-monopoly committee, State inspection on price cotrol, and Association of producers of medical products. Source.
The price-setting mechanism for medical products in Ukraine is a question of corruption for a long time, esp. when the government agencies buy drugs at artificially inflated prices. However, back then no questions to price-setting mechanism were asked. Prior to presidential campaign the government played the card of "flu epidemics threatening the nation" and drug-stores became the culprits of deficit and speculation with flu prevention drugs. Following the scandals with drug-stores getting filthy rich speculating on first aid drugs the government continues to develop the story increasing its intervention in and discretionary power over the pharmaceutical business in Ukraine.
The commission will consist of reps of the Tax administration, Anti-monopoly committee, State inspection on price cotrol, and Association of producers of medical products. Source.
The price-setting mechanism for medical products in Ukraine is a question of corruption for a long time, esp. when the government agencies buy drugs at artificially inflated prices. However, back then no questions to price-setting mechanism were asked. Prior to presidential campaign the government played the card of "flu epidemics threatening the nation" and drug-stores became the culprits of deficit and speculation with flu prevention drugs. Following the scandals with drug-stores getting filthy rich speculating on first aid drugs the government continues to develop the story increasing its intervention in and discretionary power over the pharmaceutical business in Ukraine.
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