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.

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.

The Agriculture Ministry of Ukraine on Friday signed a memorandum of understanding with domestic grain exporters to set indicative grain export volumes for 2018/19 MY. The tentative export forecasts for food-quality wheat (incl. wheat flour) and feed wheat were each set at 8 Mt.

Sugar exports from Ukraine totaled 538 kt in the eleven months of 2017/18 MY (September 2017-August 2018), down 28% y-o-y.

Consumer prices declined 0.7% m-o-m in July after two months of zero growth, causing y-o-y inflation to slow to 8.9% from 9.9% in June. Core inflation, a measure adjusted for regulated utility tariffs and prices for raw food and energy, inched down 0.1% m-o-m and slowed marginally to 8.8% y-o-y from 9.0% in June.

The Finance Ministry held its second extraordinary bond auction yesterday, selling $61m of 6-month USD bonds at 5.95% p.a. (+6bp from previous placement two days ago) and UAH 1.0bn of 3-month UAH-denominated bonds at 18.0% p.a. (unchanged from before).

Natural gas consumption in Ukraine dropped 11% m-o-m and 1% y-o-y to 1.2 bcm in June, bringing 1H18 consumption up 8% y-o-y to 18.6 bcm. On the supply side, domestic gas extraction in June was down 2% m-o-m and flat y-o-y at 1.7 bcm, with 1H18 production at 10.2 bcm (-1% y-o-y). Imports from the EU totaled 1.1 bcm (-6% m-o-m, +6% y-o-y), putting 1H18 imports at 4.4 bcm (-37% y-o-y). The volume of gas pumped into underground storage facilities was relatively unchanged m-o-m and up 3% y-o-y at 1.6 bcm, reducing net offtake in 1H18 to 3.8 bcm (vs. close to zero in 1H17). Transit to the EU/CIS rose 6% m-o-m and 2% y-o-y to 7.6 bcm in June but was down 7% y-o-y to 42.5 bcm in the first half.

In July, total customer deposits increased 1.5% m-o-m (+14.6% y-o-y) on hryvnia accounts and were down 0.1% m-o-m (+0.3% y-o-y) on F/X accounts. Outstanding hryvnia loans rose 1.5% m-o-m (+12.6% y-o-y), with F/X loans up 0.2% m-o-m and 1.9% y-o-y.

A nationwide opinion poll released yesterday showed opposition ex-PM Yulia Tymoshenko remaining the leading presidential contender with 11.1% of total voters, followed by two other opposition politicians, former defense minister Anatoliy Hrytsenko on 6.7% and pro-Russian Opposition Bloc leader Yuriy Boyko on 6.4%, and the incumbent president, Petro Poroshenko, in seventh place with 5.3%.

Raiffeisen Bank International (RBI), as part of its 2Q18 IFRS statements, reported results for its Ukrainian unit, Raiffeisen Bank Aval (BAVL). Aval booked 2Q18 net profit of EUR 45m ($54m), -6% q-o-q, bringing 1H18 net income to EUR 92m ($111m), -5% y-o-y. NIM stood at 11.7%, +0.7pp q-o-q (11.3% in 1H18, +1.2pp y-o-y), Cost/Income at 38.8%, -1.6pp q-o-q (39.6% in 1H18, -3.0pp y-o-y), and the provisioning ratio was positive at 1.8%, meaning a release of provisions, compared to +5.1% in 1Q18 (and +3.4% in 1H18 vs. +6.6% in 1H17). NPLs decreased by 3.0pp q-o-q and 21.3pp y-o-y to 19.2%, with coverage ratio at 81.8%, -1.1pp q-o-q and -9.0pp y-o-y.

Metinvest B.V. has acquired a 25% stake in Fintest Trading Co Limited, the holding company of Donetsksteel.

Ferrexpo extended its PXF facility arranged by BNP Paribas and Deutsche Bank from $195m to $400m and increased its maturity from 3 to 4 years. The interest rate remained unchanged at 450bp over Libor. The facility has a 1-year grace, followed by quarterly amortizations.

WSE-listed dairy producer Milkiland reported that AVIVA Otwarty Fundusz Emerytalny Aviva BZ WBK (Aviva OFE) reduced its holding of shares of Milkiland N.V. below the threshold of 5% of the total number of votes following selling transactions on Jul. 26. As of Jul. 30, Aviva OFE held 1,561,306 Milkiland shares (4.996% of share capital), down from 1,570,579 shares or 5.03% before.

The Finance Ministry, at an auction yesterday, sold the equivalent of $270m of F/X-denominated bonds, including $133m of 3-month USD bonds at 5.52% p.a. (first 3-month placement since February 2015), $58m of 6-month USD bonds at 5.89% p.a. (+64bp from prior sale on July 24) and EUR 68m of 3-month debt at 4.39% p.a. (+19bp from 1-year EUR placement on July 24). The Ministry also sold UAH 3.0bn of UAH-denominated bonds, including UAH 1.8bn of 3-month and UAH 1.1bn of 6-month paper placed at 18.0% p.a. (unchanged w-o-w), UAH 14m of 1-year bonds at 17.8% (+19bp vs. prior sale on July 17) and UAH 2m of 2-year bonds at 16.8% (unchanged from before).

NBU gross foreign reserves slipped by 1.3% m-o-m (-$0.2bn) to $17.7bn in July and were down $1.1bn or 5.6% on a YTD basis. The latest reserves reading was equivalent to an est. 3.2 months of 12-month trailing goods and services imports.

WSE-listed Astarta Holding, Ukraine’s largest sugar producer, finished harvesting early grain crops, collecting over 250 kt in total, including 242 kt of winter wheat. Winter wheat yields ranged from 4.5 t/ha (eastern farms) to 5.3 t/ha (western farms), both falling below company projections due to unfavorable weather during the spring vegetation period.