KYIV, UKRAINE, August 2, 2000 - A new player entered Ukraine's financial markets today, aiming to capitalize on improving prospects for economic growth and to renew Western interest in the country.
Dragon Capital offers a full range of brokerage services to institutional investors, along with corporate finance services for local and international companies. The company is a partnership founded by young finance professionals, each with at least five years' experience in Central and Eastern Europe.
“Our strategy combines deep local knowledge with Western-standard service," said Michael Sito, Dragon's director of sales and trading. "There's a niche available for this type of bank. And with the team we've put together, which is the most experienced and professional in Ukraine, we're confident that we can fill that niche."
Since Ukraine's financial markets collapsed after Russia's financial crisis in August 1998, both Western investor interest and thorough market coverage have been conspicuously absent, and the founders of Dragon Capital believe this self-sustaining cycle should end. They hope to break it by giving investors a much clearer picture of what's happening in Ukraine, demonstrating its attractiveness as an investment destination.
“At the moment, the prospects for Ukraine look better than ever," said Kamil Goca, Dragon's research director. "The Yushchenko government's reforms, and more importantly the support they've gotten from the president and Parliament, have given Ukraine a much-needed base for real change."
Ukraine's economy is growing for the first time since the country achieved independence in 1991, privatization revenue in the first half of 2000 was more than UAH 1 billion (compared to UAH 695 million for all of 1999), and the government is pushing hard to reform the energy sector, agriculture and the tax system.
Goca also points out that the market is still trading close to the post-crisis valuation levels of late 1998. "Even with its recent correction, Russia's market is way off its low, but Ukraine is still incredibly cheap," he says.
This is demonstrated by the historical track of the company's newly established KP-Dragon Index, which follows the top stocks on Kyiv's PFTS stock exchange. The index's lifetime low is just 4% of its pre-crisis peak; since then, it has climbed back to 15%. By contrast, Moscow's benchmark RTS Index fell to 7% of its peak and has since bounced back to 33%.
Goca adds that top Ukrainian companies are trading at discounts of about 70% to their Russian rivals on fundamental valuations, compared with discounts of around 30% before the crash.
Dragon Capital is a licensed Ukrainian broker and a member of the PFTS, Ukraine's principal stock exchange. The bank plans to play a major role in the development of Ukraine’s young capital markets.
“A market as young as Ukraine’s needs young, aggressive brokers who are committed both to the country and to Western ways of doing business,” Sito said. " And that’s exactly who we are."