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Ukraine: Stock Market Continues Its Decline

By Katya Gorchinskaya

Kyiv, 14 April 1998 (RFE/RL) -- Ukraine's stock market has been declining steadily this month, bringing its current level to that of June last year. Between April 2-9 alone, stock market indexes fell as much as 13 percent, and this is not the end of the fall, experts predict.

"Over the next few weeks, we can expect a further decline of about five percent," said Tomas Fiala, director of Wood and Company investment company.

Experts cite several reasons for the current decline, both internal and external. The say results of the recent election to the new parliament had a significant influence on the market, while the unstable situation on Russia's stock market, and energy-related shares about to be offered on Ukraine's market have produced the decline.

Daniel Butler, equities dealer at Atlantik East investment company said his company has been recommending that potential Ukrainian investors wait to see the true color of parliament, because potentially the more than 100 non-aligned deputies and some of the leftists might be more reformist then they are perceived. "Over the last few days, the would-be investors have been asking us what to do, and we have been telling them to wait for the first vote on any sensitive issue," said Butler.

Another major reason for the decline of stocks is an unstable situation in Russia. Investment company director Fiala said that investors working in the Russian market, normally work also in Ukraine, and value a Ukrainian companies against a similar Russian one. However, the Russian market has been declining since March 23, when President Boris Yeltsin unexpectedly fired the whole of Russian government. "We don't know how long it's going to take to confirm new premier (Sergei) Kiriyenko, and, for now, the market is quiet," said Fiala. "If no one is investing in Russia, there is a 'break' in other CIS countries."

The other internal reason analysts cite for the decline of Ukraine's stock market, is new shares of energy companies coming to the market. Energoatom workers, whose companies cannot be privatized, have been receiving shares of other energy-producing firms at nominal value, and reselling most of them at the stock market, which brought the index down too. Companies say that the market will return to normal in two or three months, however. Fiala predicted that the share prices will not be pushed too high, because more energy shares are expected to come to the market -- in particular, the shares of several regional energy-distribution companies.

Experts say investors are preparing to come to the market. "They would not be talking to us and raising money (as they are doing now), if they did not have serious plans to invest in Ukraine," equities dealer Butler said. He said the government is very likely to try to accelerate privatization, and the parliament will also realize how badly Ukraine needs it. "This country needs money, but the only way to get it is through privatization -- raising bonds is too expensive, and raising taxes is inefficient," said Butler. "I honestly believe that parliament will vote for privatization," he said.