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13.08.2018
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Ukrainian Bond Weekly

As the EM debt sell-off intensified on the back of Turkey’s woes, the IMF issued a statement today to announce its mission would visit Kyiv on Sep. 6-19, which suggests there has been notable progress on the outstanding issues. This week, markets will be looking for further, more tangible signs that agreement with the IMF on gas tariffs and the 2018 budget is being reached. On a related note, Fitch issued a short note today, saying that Ukraine’s credit profile has been supported by easing inflationary pressures, moderating economic imbalances and declining debt, but low external liquidity made an IMF program a key factor of the country’s creditworthiness. Fitch expects the fourth review of the outstanding IMF program to be finalized in 3Q18 but sees increased risk of delays. In the meantime, the government managed to slightly improve its liquidity position last week by selling $331m and UAH 4.0bn of domestic bonds (mostly short-term) and thus improving the respective YTD rollover rates to 128% and 99%. Still, in view of large debt repayments scheduled for this week ($381m on domestic USD-denominated bonds and UAH 3.4bn on UAH bonds on Aug. 15), the upcoming primary bond auction on Aug. 14 will remain in focus. Among macro data releases, flash 2Q18 GDP on Aug. 14 will likely bring a bit of positive news. We estimate real GDP growth sped up to 3.5% y-o-y from 3.1% in 1Q18, boosted by an upsurge in agricultural production in June and helped by a low comparison base.
Ukraine Strategy Weekly: More 1H18 Reporting Amid Turkey Turbulence
13.08.2018
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Ukraine Strategy Weekly: More 1H18 Reporting Amid Turkey Turbulence

Following the freefall in Turkish markets (equities -22% w-o-w) and concurrent drop in the EM/FM universe (see more below), local stocks had little chance to avoid being hit by strong negative sentiment across asset classes. As a result, the KP-Dragon index lost 0.6% w-o-w while the local PFTS index slid by 2.1% in UAH and 2.7% in USD terms. It was another volatile week for foreign-listed stocks (over ¾ of KP-Dragon by weight), with Ferrexpo recovering by 5.3% w-o-w while Regal Petroleum reversed course and lost 25% (after +115% the week before). Large agricultural stocks were less volatile (MHP -0.4%, Astarta -0.7%, Kernel -2.3%) but second tier agros dropped more: Ovostar -2.4%, Milkiland -3.4%, and IMC -4.1%. AST reported weaker early crop harvest volumes (yields -9% y-o-y), which seems to have had no effect on the stock price (most of the w-o-w declines on the WSE were explained by the PLN’s 2+% devaluation vs. the USD). In the local market, all stocks lost heavily in USD terms, with Donbasenergo -6.3%, Centrenergo -1.8%, Raiffeisen Bank Aval -1.7%, Ukrnafta -1.6%, and Turboatom -1.4%. However, there was company news from BAVL only: its parent Raiffeisen Bank International reported 2Q18 IFRS results, though its numbers for BAVL were almost in line with the bank’s standalone results (e.g. NI of $54m vs. $52m, respectively). We also upgraded our fundamental view on the stock, assigning a Buy recommendation.
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