Financial Markets Snapshot

Transcription

1 Financial Markets Ukraine Financial Markets Snapshot 9 January 29 Alexander Pecherytsyn Head of research Kiev (38 44) alexander.pecherytsyn@ingbank.com Daria Volchenko Research analyst Kiev (38 44) daria.volchenko@ingbank.com Markets update Market comment: closing rate did not reflect real rate at FX market Closing price at FX market yesterday shows 2.4% of hryvnia s strengthening to 8.1/USD. However as the majority of transactions were conducted at a rate of /USD we believe the closing price did not reflect market reality. The intervention of the NBU with US dollars offered at 8.51/USD support our estimations. The market still suffers from the uncertainty regarding Russian-Ukrainian gas talks while late NBU interventions poorly restrain the devaluation trend at the market. We expect devaluation fears to prevail in the FX market today unless the NBU will announce its intervention rate before the market opens or unless Russia and Ukraine will resolve their gas dispute. Today s main news story Consumer price growth reached 22.3% over 28 CPI accelerated its upturn to 2.1% MoM in December. The key drivers for price growth last month were hryvnia devaluation and an upward adjustment in utility tariffs. The year-end headline inflation (22.3% YoY) for the whole 28 came in very close to our estimate (22.2% YoY) and was slightly above the market consensus forecasts (22.% YoY). The annual figure for 28 was significantly above the level of price growth in 27 (16.6% YoY). It was the highest figure since 2 when Ukraine recovered from the painful 1998 crisis and started to show economic revival. The strong rally of world commodity prices in 27, heavy social spending in late 27 early 28 as well as a poor harvest in 27 were the most significant reasons behind soaring inflation in the middle of 28 to 31.1%, which is the highest level since 2. High inflation last year was a first worrying indicator of upcoming significant problems in economy. An unexpectedly rich harvest this year as well as a set of anti-inflationary measures implemented by the NBU and the Government (including artificial hryvnia revaluation and administrative price control) forced the inflation trend to change its direction in the middle of last year. Benchmark yields (%) %ch Last (DoD) Ukraine Dec-9 (UAH) Exchange rate Last Money market rates (%) Last %ch (DoD) UAH/US$ Bp (DoD) O/N UAH week UAH months UAH Public utilities led the price race last year and ended 28 with 28.2% YoY growth in their tariffs over 28 compared with 12.3% YoY in 27. Furthermore, this upturn accelerated most significantly over the last four months of 28 as the government started to adjust tariffs to their break-even only after the general inflation level started to show a declining pace. However, as such an adjustment is one of the requirements of the IMF while new gas prices may even accelerate the trend, we expect a quite substantial significance of this group in this year s inflation. Tremendous growth in world oil prices in 27-1H8 together with inertia for fuel products prices in Ukraine to decline at the same pace as world oil prices did over 2H8, influenced a significant upturn in transport tariffs by 22.5% YoY over 28 compared to just 14.5% YoY growth over 27. Although the most substantial hryvnia devaluation occurred over the last two months of 28, it had time to negatively affect a slowdown in the general price level and moved growth in prices of non-food goods (that are SEE THE DISCLOSURES APPENDIX FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATION

2 mostly imported into Ukraine) to 16.2% YoY as of the end of 28, up from 2.9% YoY as of the end of 27. Fig 1 28 CPI stays at 8-year high Fo recast Fig 2 Public utilities tariffs led price growth F 2F 211F CPI (%) M3 growth (%) NBU discount rate (%) -5 Public utilities Non-food goods Restaurants and hotels Transport Telecommunications Foodstuffs Source: State Statistics Committee, ING Source: State Statistics Committee _ Ukraine has not yet had time to gain from the slowdown in its inflation over 2H8 as December figures already show a significant upturn in consumer price growth (2.1% MoM compared to a 1.5% MoM upturn in November). Such figures kept annual inflation flat in December at 22.3%. An accelerating trend in monthly inflation may be another worrying sign for a domestic economy that will have to remain in a highly inflationary environment this year. Growth in public utilities tariffs and hryvnia devaluation influenced the inflation acceleration in December. In particular, a 35% increase in gas residential tariffs since 1 December affected 7.5% growth in public utilities tariffs over the last month while another spike in UAH/USD exchange rate affected growth in prices of imported consumer goods (mainly represented by non-food goods) by 4.7% MoM. The necessity to adjust tariffs for public utilities at least to their break-even level together with further upcoming growth in the price of imported gas will not allow inflation to return to the single-digit area this year. We think that quite significant hryvnia devaluation at the end of 28 as well as imposition of additional import duties will further impact growth in consumer prices at least for the nearest quarter. At the same time, a deterioration of consumer demand due to the absence of growth in households real income as well as due to poor availability of banking consumer loans, should allow the annual price level to keep slowing down in 2H9. Thus we still reiterate our 29 year-end inflation forecast at 16.9%. 2

3 Fig 3 Narrower gap between CPI and M3 growth Fig 4 Lower impact of foodstuffs inflation /7 8/7 9/7 /7 11/7 12/7 1/8 2/8 3/8 4/8 5/8 6/8 7/8 8/8 9/8 /8 11/8 CPI (%, YoY) NBU ref rate (%) M3 (%, YoY) 12/8 7/7 8/7 9/7 /7 11/7 12/7 1/ 8 2/8 Foodstuffs Transport 3/8 4/8 5/8 6/8 7/8 8/ 8 9/ 8 /8 11/8 Public utilities Hotels and restaurants 12/8 Source: State Statistics Committee, NBU Source: State Statistics Committee _ Investment implications: As the inflation figure was almost in line with consensus forecasts, it had not disappointed the market and should have a neutral impact on investors current attitude towards Ukraine. Ceteris paribus, we keep year-end inflation forecast at 16.9% YoY. At the same time, the possible failure of the Ukrainian government to negotiate a mild growth in imported gas price for this year poses the highest risk for inflation acceleration till the end of 29. In case Ukraine will afford a 2.5x growth in gas prices, we may expect another phase of hryvnia weakening which, in turn, will also accelerate inflation this year. 3

4 Foreign exchange market: rates and trading volumes Exchange rate UAH vs. USD FX market daily turnover 9.5 Last 8./USD (-2.41%DoD) 2,5 Last 12-month av erage daily turnov er US$411m (USD/UAH) /6/8 7/8/8 7//8 7/12/8 (US$m) 2, 1,5 1, 5 8/4/8 8/6/8 8/8/8 8//8 8/12/8 Close bid CB intervention Other currencies USD turnover * One-year history. Source: NBU, Reuters * One-year history. Source: NBU, Reuters FX market highs/lows: UAH vs. USD FX market highs/lows: EUR vs. USD (USD/UAH) /12/ /12/ /12/8 31/12/ /1/9 2/1/9 3/1/9 High-low range /1/9 5/1/9 6/1/9 7/1/9 8/1/9 CB intervention (USD/UAH) (EUR/USD) /12/ /12/ /12/ /12/ /1/ /1/ /1/ /1/ /1/ /1/ /1/ /1/9 * One-month history. Source: NBU, Reuters * One-month history. Source: NBU, Reuters Money market: interest rates and liquidity in banking sector Overnight money-market rates Liquidity in the banking system 6.% Last bid=2.28%, ask=26.75% 5.% 4.% 3.% 2.%.%.% 1/8 3/8 5/8 7/8 9/8 11/8 1/9 (UAHbn) 3. Last CB balance UAH22.17bn (2.31%DoD) 5.% % 2. 3.% % 5..%..% 1/8 3/8 5/8 7/8 9/8 11/8 1/9 Bid Ask Banks balance with CB (lhs) O/N mid market int rate (rhs) * One-month history. Source: NBU, Reuters * One-month history. Source: NBU, Reuters 4

5 _ Ukraine's Financial Markets Snapshot Debt market: yield curve, benchmarks and bond quotes Secondary market valuations (market closed 9 January 29) Domestic bond market: term structure of yields in the secondary market Aval Bank (B) Oshchadbank (Saving Bank) (A) MoF 246 Rovex (B) Vant (A) Ipobank (A) MoF 299 Khreshchatyk Bank (F) Dongorbank (C) Euro Leasing (B) Donetsksteel (A) Pivdenny (A) Donetsk (C) MoF 1626 Ukrgazbank (E) Megabank (E) Ukrgazbank (B) Finance Leasing Group (B) Oshchadbank (Saving Bank) (B) Creditprombank (F) Energobank (A) Megabank (F) MoF Donetsk (B) Zaporizhya (E) Lugansk (A) Lugansk (B) MD (years) Government bonds Municipal bonds Mortgage bonds Corporate bonds (financials) Corporate bonds (non-financials) All data as of close prices for last trading session. Corporate bonds with at least UAHm outstanding are depicted. Source: PFTS, ING Benchmark yields Government bond 26 (due Apr-9) Government bond (due Jun-) YTM (%) (UAHm) YTM (%) (UAHm) 17/1/8 17/4/8 17/7/8 17//8 8/1/8 8/4/8 8/7/8 8//8 8/1/9 Turnov er (rhs) Bid YTM Ask YTM Last YTM Av g YTM Turnov er (rhs) Bid YTM Ask YTM Last YTM Av g YTM * One-year history. Source: PFTS * One-year history. Source: PFTS 5

6 Bond quotes (market closed 8 January 29) PFTS Issuer name Coupon Maturity/ Price Yield (%) Trade Ticker rate (%) put date Bid Ask Last Avg* Bid Ask Last Avg* volume (UAH) Government bonds 299 Ministry of Finance Dec Ministry of Finance Apr Ministry of Finance Sep Ministry of Finance Sep Ministry of Finance Jun Municipal bonds OODESC Odesa (C) Dec OBORSA Boryspil (A) Jul OLUGB Lugansk (B).4 31-Oct OLUGA Lugansk (A).4 31-Oct OZAPRE Zaporizhya (E) Jul ODON2C Donetsk (C) Sep ODONCB Donetsk (B) Jul OBERDA City of Berdyansk (A) Aug Mortgage bonds ODIUD SMI (D) Dec OUGZBB Ukrgazbank (B).5 25-Feb ODIUE SMI (E) Dec ODIUI SMI (I) Dec Corporate bonds (Financial institutions) OFNINA CB Finansova initsiatyva (A) Jul OBVLB Aval Bank (B) Jan OBVLC Aval Bank (C) Jan OBXRF Khreshchatyk Bank (F) Sep OCREDA Credit-Dnipro (A) Apr OELZB Euro Leasing (B) Oct OFLGB Finance Leasing Group (B) Dec OFNINB CB Finansova initsiatyva (B) 2. 7-Dec OHYPBA Ipobank (A) Nov OIMEXB Imexbank (B) Nov COBVLE Aval Bank (E). 11-Nov OZUKBB Credobank (B) Jun COBVLF Aval Bank (F) Nov COENRA Energobank (A) Dec COKPBF Creditprombank (F) Jun COPUMB FUIB (A) Jun OALFC Alfa-Bank (C) Dec OARTAB ArtA Securities (B) May OUPRBA Ukrainian professional bank (A) Jun OUGZBA Ukrgazbank (A) Jul OUGZBD Ukrgazbank (D) Sep OSCHDB Oshchadbank (Saving Bank) (B).5 12-Aug OUPRBB Ukrainian professional bank (B) Jun OUPRBC Ukrainian professional bank (C) May OUPRBD Ukrainian professional bank (D) Nov OUSCB2 Ukrsotsbank (B) Jun OVBNF VAB Bank (F) May OVBNG VAB Bank (G) Mar OZEMBA Kharkiv JSC Zemelniy Bank (A) Dec OZUKBA3 Credobank (A) Feb OUGZBE Ukrgazbank (E) Dec OPUMBB FUIB (B) Apr OMGBE Megabank (E) Dec OPCBF ProCredit Bank (F) Sep Corporate bonds (Non-financial institutions) OCPFB Cherkasy Battery Farm (B) 25. -Nov OKRVNC Karavan (C) Jun OHLPD Concern Khlibprom (D) Aug OKMEDA Kyivmedpreparat (A) Nov OKRVNA Karavan (A) May

7 Bond quotes (market closed 8 January 29) PFTS Issuer name Coupon Maturity/ Price Yield (%) Trade Ticker rate (%) put date Bid Ask Last Avg* Bid Ask Last Avg* volume (UAH) OAGMTA Agromat (A) Jul CODSTA Donetsksteel (A) Oct COFSHC Furshet (C) Apr COSVTA Soyuz-Victan Trade (A) Mar COVINB Vinnifruit Invest (B) Dec OAMSE Amstor (E) Dec OATMB Atlant-M (B) Mar OKZMOA Kostyantynivsky ZMO (A) Dec OKGSTA Kyivmiskbud-1 (A) Dec OSUMHA Sumykhimprom (A) Jun OUAHA Ukrainian Automobile Holding (A) Apr OUTSTA YutiSt (A) Mar OVVSA VVS-LTD (A) Sep OVVSB VVS-LTD (B) Sep OLUAZA LuAZ (A) Jun OLUAZB LuAZ (B) May OMKSB MKS (B) Jan OMTIA MTI (A) 15. -Nov ONIDNA Nidan+ (A) Jun OSBMC Spetsbudmontazh (C) Sep OSBMB Spetsbudmontazh (B) Jun OPDILA Podillya (A) May * Average price. Listed are corporates bonds with at least UAH25m outstanding. Source: PFTS, ING. 7

8 Disclosures Appendix ANALYST CERTIFICATION The analyst(s) who prepared this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about the subject securities or issuers and no part of his/her compensation was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. IMPORTANT DISCLOSURES Company disclosures are available from the disclosures page on our website at The remuneration of research analysts is not tied to specific investment banking transactions performed by ING Group although it is based in part on overall revenues, to which investment banking contribute. Securities prices: Prices are taken as of the previous day s close on the home market unless otherwise stated. Conflicts of interest policy. ING manages conflicts of interest arising as a result of the preparation and publication of research through its use of internal databases, notifications by the relevant employees and Chinese walls as monitored by ING Compliance. For further details see our research policies page at FOREIGN AFFILIATES DISCLOSURES Each ING legal entity which produces research is a subsidiary, branch or affiliate of ING Bank N.V. See back page for the addresses and primary securities regulator for each of these entities.

9 AMSTERDAM BRUSSELS LONDON NEW YORK SINGAPORE Tel: Tel: Tel: Tel: Tel: Bratislava Tel: Bucharest Tel: Budapest Tel: Buenos Aires Tel: Dublin Tel: Edinburgh Tel: Geneva Tel: Hong Kong Tel: Istanbul Tel: Kiev Tel: Madrid Tel: Manila Tel: Mexico City Tel: Milan Tel: Moscow Tel: Paris Tel: Prague Tel: Santiago Tel: Sao Paulo Tel: Seoul Tel: Shanghai Tel: Sofia Tel: Taipei Tel: Tokyo Tel: Warsaw Tel: Research offices: legal entity/address/primary securities regulator Almaty Representative office, ING Bank N.V. in Kazakhstan, 85a, Dostyk Avenue, Office 5, 5, Almaty, Kazakhstan. Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market & Financial Organizations Amsterdam ING Bank N.V., Foppingadreef 7, Amsterdam, Netherlands, 12BD. Netherlands Authority for the Financial Markets Bratislava ING Bank N.V., pobocka zahranicnej banky, Jesenskeho 4/C, Bratislava, Slovak Republic. National Bank of Slovakia Brussels ING Belgium S.A./N.V., Avenue Marnix 24, Brussels, Belgium, B-. Banking Finance and Insurance Commission Bucharest ING Bank N.V. Bucharest Branch, Kiseleff Avenue, PO Box 2-28, 11342, Bucharest 1, Romania Romanian National Securities and Exchange Commission Budapest ING Bank N.V. Hungary Branch, Dozsa Gyorgy ut 84\B, H - 68 Budapest, Hungary. Hungarian Financial Supervisory Authority Dubai ING Bank N.V. Dubai Branch, Level 2, Gate Village 5, Dubai International Financial Center (DIFC), PO Box Dubai Financial Services Authority Edinburgh ING Bank N.V. London Branch (Edinburgh office), 2 Canning Street Lane, Edinburgh, United Kingdom, EH3 8ER. Authorised by the Dutch Central Bank Hong Kong ING Bank N.V. Hong Kong Branch, 39/F, One International Finance Centre, Central Hong Kong. Hong Kong Monetary Authority Istanbul ING Bank A.S, ING Bank Headquarters, Eski Buyukdere Cad, Ayazaga Koyyolu No:6, Maslak 34467, Istanbul, Turkey. Capital Markets Board Kiev ING Bank Ukraine JSC, 3-a, Spaska Street, Kiev, Ukraine, 47 Ukrainian Securities and Stock Commission London ING Bank N.V. London Branch, 6 London Wall, London EC2M 5TQ, United Kingdom. Authorised by the Dutch Central Bank Madrid ING Bank NV, Sucursal en Espana, C/Genova, 27. 4th Floor, Madrid, Spain, 284. Comisión Nacional del Mercado de Valores Manila ING Bank N.V. Manila Branch, 21/F Tower I, Ayala Avenue, 1226 Makati City, Philippines. Philippine Securities and Exchange Commission Mexico City ING Grupo Financiero (Mexico) S.A. de C.V., Bosques de Alisos 45-B, Piso 4, Bosques de Las Lomas, 512, Mexico City, Mexico. Comisión Nacional Bancaria y de Valores Milan ING Bank N.V. Milano, Via Paleocapa, 5, Milano, Italy, Commissione Nazionale per le Società e la Borsa Moscow ING Bank (Eurasia) ZAO, 36, Krasnoproletarskaya ulitsa, Moscow, Russia. Federal Financial Markets Service Mumbai ING Vysya Bank Limited, A Wing, Shivsagar Estate, 2nd Floor, South Wing, Dr. Annie Besant Road, Worli, Mumbai, India Securities and Exchange Board of India New York ING Financial Markets LLC, 1325 Avenue of the Americas, New York, United States,19. Securities and Exchange Commission Paris ING Belgium S.A., Succursale en France, Coeur Défense, Tour A, La Défense 4, 1 Esplanade du Général de Gaulle, Paris La Défense Cedex, l Autorité des Marchés Financiers Prague ING Bank N.V. Prague Branch, Nadrazni 25, 15 Prague 5, Czech Republic. Czech National Bank Sao Paulo ING Bank N.V. Sao Paulo, Av. Brigadeiro Faria Lima n. 3.4, 11th Floor, Sao Paulo, Brazil Securities and Exchange Commission of Brazil Singapore ING Bank N.V. Singapore Branch, 19/F Republic Plaza, 9 Raffles Place, #19-2, Singapore, Monetary Authority of Singapore Sofia ING Bank N.V. Sofia Branch, 12 Emil Bersinski Str, Ivan Vazov Region,148 Sofia, Bulgaria. Bulgarian Central Bank and Financial Supervision Commission Warsaw ING Bank Slaski S.A, Plac Trzech Krzyzy, /14, Warsaw, Poland, Polish Financial Supervision Authority Disclaimer This report has been prepared on behalf of ING (being for this purpose the wholesale and investment banking business of ING Bank NV and certain of its subsidiary companies) solely for the information of its clients. ING forms part of ING Group (being for this purpose ING Groep NV and its subsidiary and affiliated companies). It is not investment advice or an offer or solicitation for the purchase or sale of any financial instrument. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, ING makes no representation that it is accurate or complete. The information contained herein is subject to change without notice. ING Group and any of its officers, employees, related and discretionary accounts may, to the extent not disclosed above and to the extent permitted by law, have long or short positions or may otherwise be interested in any transactions or investments (including derivatives) referred to in this report. In addition, ING Group may provide banking, insurance or asset management services for, or solicit such business from, any company referred to in this report. Neither ING Group nor any of its officers or employees accepts any liability for any direct or consequential loss arising from any use of this report or its contents. Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. Any investments referred to herein may involve significant risk, are not necessarily available in all jurisdictions, may be illiquid and may not be suitable for all investors. The value of, or income from, any investments referred to herein may fluctuate and/or be affected by changes in exchange rates. Past performance is not indicative of future results. Investors should make their own investigations and investment decisions without relying on this report. Only investors with sufficient knowledge and experience in financial matters to evaluate the merits and risks should consider an investment in any issuer or market discussed herein and other persons should not take any action on the basis of this report. This report is issued: 1) in the United Kingdom only to persons described in Articles 19, 47 and 49 of the Financial Services and Markets Act 2 (Financial Promotion) Order 25 and is not intended to be distributed, directly or indirectly, to any other class of persons (including private investors); 2) in Italy only to persons described in Article No. 31 of Consob Regulation No /98. Clients should contact analysts at, and execute transactions through, an ING entity in their home jurisdiction unless governing law permits otherwise. ING Bank N.V. London Branch is authorised by the Dutch Central Bank. It is incorporated in the Netherlands and its London Branch is registered in the UK (number BR341) at 6 London Wall, London EC2M 5TQ. ING Financial Markets LLC, which is a member of the NYSE, NASD and SIPC and part of ING, has accepted responsibility for the distribution of this report in the United States under applicable requirements. ING Vysya Bank Ltd is responsible for the distribution of this report in India. FM Additional information is available on request