Market View

May 17, 2012

„Equities: After an initial sharp decline on opening (-5.3% on the low), the UX steadily crawled all the way back up for the rest of the session to close +2.5% with MSICH carrying most of the surge on the back of international appetite. Foreign-listed stocks on the other hand had a mixed day with FXPO (-3.2%) and KER (-1.6%) trading lower in decent volume and MHPC (+1.3%) managing to close in the green zone. The stock is likely to outperform today on strong 1Q12 results (see below). Far from being out of the woods in terms of news flow, market sentiment, however, seems to be yearning for a rebound after the sharp drop in the first two weeks of the merry month of May.

Fixed income: After a weak opening Ukrainian sovereigns tried to tighten but got hit quite aggressively in the afternoon on the back of negative headlines on Greek banks coming from the ECB. Benchmark Ukraine 20s almost entered double-digit yield territory, closing at 87.5/88.5 (9.99%/9.80%). Quasi-sovereign Naftogaz lost around 0.5pt on the day, quoted at 97.0/98.0 (10.97%/10.47%). In the corporate sector some quotes were adjusted lower on little trading. Metinvest 15s and 18s dropped to 97.5/99.0 (11.26%/10.65%) and 90.25/91.75 (11.09%/10.71%) respectively. DTEK weakened to 95.0/96.0 (11.55%/11.13%).

Daily

MHP [Buy; PT $20.51] — Reports strong 1Q12 financials May 17, 2012
LSE-listed MHP, the largest Ukrainian poultry producer, reported strong 1Q12 financials with revenues of $298m (+21% y-o-y), EBITDA of $84m (+48%) and net income of $48m (+148%). MHP’s chicken meat sales were up by 1% y-o-y to 85 kt over the period while ...
Sadovaya Group [Not Rated] — Sales up 5% m-o-m in April May 17, 2012
WSE-listed Ukrainian miner Sadovaya Group increased coal sales by 5.1% m-o-m to 78.1 kt in April as demand from power generators recovered. However, its 4M12 output remained 25.4% lower y-o-y. Sadovaya’s mining output was up 6.7% m-o-m to 42.5 kt in April ...
Milkiland [Buy; PT $8.32] — Banned subsidiary close to resuming exports to Russia May 17, 2012
Russian authorities announced they have completed final quality examination of cheese samples from two Ukrainian producers, including WSE-listed Milkiland’s Mena subsidiary, clearing 11 out of 14 batches for imports to Russia (including four batches from ...
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Reports

DTEK: Converging With Metinvest, But Enjoying Much Brighter Prospects May 16, 2012
We recommend buying DTEK 15s which are trading with an attractive 206bp spread to the sovereign curve (11.3% YTM). The company recently reported strong 2011 financials and is set to benefit from a recent privatization spree during which it acquired stakes ...
Ukrainian Bonds: Global Risk-off Mood Outweighs Local Positives May 14, 2012
Ukraine’s 5-year CDS spreads closed 26bp w-o-w wider at 791bp last week (-58pp YTD), in line with CEE credits’ dynamics (CDS for Hungary, Bulgaria, Romania and Poland widened by 23bp w-o-w on average). As a result, Ukraine’s sovereign curve moved up by 30 ...
Ukraine Strategy Weekly: Flight from Volatility Hits Local Stocks May 14, 2012
It seems that “sell in May and go away” is firmly cementing itself as a new post-2008 tradition. Last week the MSCI World index was down by 1.8% w-o-w while the MSCI Emerging Markets and Frontier Markets indices shed 4.1% and 1.6% respectively. Deteriorat ...
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Name Close 1d, % 1m, % YTD, %
DAX 6,401.06 (0.79) (3.38) 8.52
FTSE100 5,437.62 (0.51) (4.04) (2.42)
KP-Dragon 3,148.32 (2.25) (18.64) (3.61)
MICEX 1,344.75 0.55 (9.00) (4.10)
PFTS 451.79 (2.08) (14.95) (15.46)
S&P500 1,330.66 (0.57) (2.84) 5.81
UX 1,119.30 (1.33) (20.96) (23.28)
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