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MARKETS OVERVIEW:
Ukrainian stocks advance on a bullish momentum from global markets. Hryvnia flat in sideways
The Ukrainian equity market finished Monday in the positive territory on a bullish dynamics on European and American equity markets, as well as rising commodities. By the close in Kyiv, European indexes popped more than 2%, index S&P 500 rose 1.8% and oil shot up 3% higher. This environment triggered buying of Ukrainian equities, index UX gained 1.3% to 1564 points, while the PFTS index added 0.5% to close at 628 points. Trading volume on the UX was rather average, totaling UAH 26m, while equity volume on the PFTS added up to UAH 14m. Steelmakers was the leaders among the blue chip issues: Alchevsky steel mill added 3.6%, Azovstal grew by 3% and Enakievsky Steel Mill by 2.8%.
Konstantine Lytvyn
On Monday, the hryvnia continued its sideways action, which has been evident for five weeks already. The Interbank FX Market closed at UAH/USD 8.0980-8.1115, with the Ukrainian currency losing less than 0.1% against the dollar. Since the start of November, the hryvnia has not gained anything against the greenback as of Monday.
Oleksiy Blinov
ECONOMICS & POLITICS
NBU buys UAH 2bln in OVGZ for Ukrprombank depositors
During the week of November 16-20, the total amount of domestic state bonds (OVGZs) in circulation increased by UAH 5.9bln. During that time, the OVGZ portfolio held by the National Bank of Ukraine increased by UAH 2bln.
Astrum’s perspective: According to our estimates, the total amount of OVGZs in circulation increased in two installments. On Tuesday, November 17, the government held an auction where it sold OVGZs worth UAH 323m (see Astrum Daily of November 18). Then, at the end of the week, the government printed OVGZs worth UAH 5.6bln as a capital injection into the state-owned Rodovid Bank. This capital injection through this state debt emission is aimed at satisfying the claims of individual depositors who “migrated” there from the defunct Ukrprombank (see Astrum Daily of November 18 for more detail on the issue). Then, the National Bank of Ukraine promptly purchased a portion of these OVGZs, worth UAH 2bln, in order to support Rodovid’s first phase of handing out the deposits, which started on November 23. Thus, the amount of OVGZs held by the NBU has reached UAH 39.1bln, up 357% YTD. The NBU remains the largest holder of state domestic bonds, accounting now for 52.6% of all OVGZs in circulation. As a point of comparison, at the start of 2008, the NBU owned no OVGZs at all.
Oleksiy Blinov
Current account positive for second consecutive month
The National Bank of Ukraine has published its preliminary estimate for the balance of payments in October’09. The current account was positive for a second month in a row, with a surplus of USD 87m, while the financial account deficit amounted to USD 778m.
Astrum’s perspective: October’s current account figures are in line with our expectations. Foreign trade was balanced, with the balance of trade in goods and services barely close to zero. The accumulated 10M09 current account deficit stands at USD 1bln and the 10M09 financial account deficit is at USD 6.3bln. Net FDI in October stood at USD 673m. According to our estimates, most of this sum reflects a capital increase in the foreign-owned Swedbank made in October. We expect that the current account will maintain a surplus in 4Q09. In FY09, the current account deficit should stand at USD 0.8bln (0.7% of GDP). We expect that the financial account deficit in FY09 will amount to USD 7.5bln (6.3% of GDP).
Oleksiy Blinov
Next OVGZ placement scheduled for today
The Ministry of Finance will be holding the next OVGZ placement today, Tuesday, November 24, and offer 6-month bonds (redeemable on May 12, 2010), 9-month bonds (August 18, 2010), and 2-year bonds (November 23, 2012). MinFin will also offer special OVGZs for the Euro-2012 financing.
Astrum’s perspective: We expect that the new auction will not bring any changes. The government looks unprepared to increase yields and we expect that the yields level at the new auction will stay at the 19%-20% level. We thus expect that demand at the auction will be minimal. Demand will be put under additional pressure due to the low liquidity: cash in bank accounts by last Friday decreased to UAH 13bln, the minimal level for 2009. On Monday, liquidity grew to UAH 14.7bln on the back of the sale of OVGZs to the NBU in the amount of UAH 2bln, impacting on the liquidity position of the Rodovid Bank alone. The demand for special Euro-2012 OVGZs does not depend on market sentiment thus it is currently harder to predict the level of demand for these bonds.
Sergey Fursa
COMPANIES & INDUSTRIES
Stirol launches production of shockproof polystirols
Stirol (STIR: SELL) has launched the renovated production of six new types of polystirols. The new line has an installed capacity of 12,500 tonnes per annum. This project is one of Stirol’s strategic programs to develop new activities that are not related to ammonia production in order to increase the share of its organic and pharmaceutical division in the sales. The shockproof polystirols used in food processing and engineering will substitute plastics currently imported to Ukraine. Stirol has invested a total of UAH 45m into this particular project.
Astrum’s perspective: We find this news POSITIVE for Stirol’s stock. We positively consider Stirol’s development in business areas that are not related to ammonia production. We forecast that this new business will generate USD 21m in sales for Stirol in 2010. At the same time, the revenue from this business should account for just up to 5% of Stirol’s 2010 net sales, while nitrogen fertilizers should account for 87%.
Alexander Kava
MSICH delays launch of its Russian facility
According to the press service of Motor Sich (MSICH: U/R), the Company plans to open its facility in Dubna, Russia in spring 2010. Earlier, MSICH had announced plans to launch the plant by the end of 2009.
Astrum’s perspective: This news is NEUTRAL for MSICH. The new capacities in Russia should secure MSICH’s position on the Russian market for aviation engines used for military purposes, which should be beneficial in the case that relations between Russia and Ukraine worsen. We expect that the delay in the launch of the facility will not affect MSICH’s position on the Russian market.
Igor Bilyk
Mariupol Illich refuses to pay on promissory notes
According to Interfax, the company Business Invest required Mariupol Illich Steel Mill (MMKI: U/R) to pay on its UAH 75.5m promissory notes. In its turn, MMKI claims that the promissory notes are fictitious and refuses to make the payment.
Astrum’s perspective: We believe that the issue will sooner or later go to the courts and our preliminary assumption is that MMKI will win the case. Thus, we consider the news as NEUTRAL for the stock.
Yuriy Ryzhkov
Oshadbank opens UAH 12m credit line for HMON
State owned Oshchadbank has opened a UAH 12m credit line for electricity distribution and supply company Khmelnitskoblenergo (HMON: N/R). The credit agreement has been signed on October 30, 2009 and expires on October 30, 2010.
Astrum’s perspective: Khmelnistkoblenergo announced the tender to select a bank in August 2009. As the state owns 70% of Khmelinstkoblenergo, the selection of Oshchadbank, which often provides financing for state-owned electricity companies, is natural. We view the news as POSITIVE for the Company.
Yan Lipchinsky
To receive additional information, please contact:
Yuval Shavit
Communications Director
Astrum Investment Management
Mob.: +380 (67) 236 46 73
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