The Ukrainian stock market ended 2017 on a firmly positive note, with Kyiv-listed equities enjoying a month-long “Santa Claus” December rally to bring the total gain for the UX index to a whopping 70% for the year (about 57% after adjusting for currency devaluation). Although the overall economic recovery in the country has remained below optimistic expectations, a rise in global prices for commodities have provided some confidence that Ukraine’s steel and agro sectors will perform well in 2018.
The UX index added 1.9% in the short 3-day trading week ahead of the New Year holiday, closing at 1363 points, as the local market closed for the first time to observe the Western Christmas holiday on Monday (Dec 25). Motor Sich (MSICH) was the focus of traders’ attention, advancing by 2.0% to UAH 3700 and putting its rise for December at 14%. We believe that fears that the company could lose orders due to state restrictions on exports to Russia have faded away for now. Currently there are bright prospects that Motor Sich will strengthen its presence in Asian markets, especially in China, where the company has entered a joint venture with Beijing aviation engine producer Skyrizon Aviation.
Electricity generator CentrEnergo (CEEN) added 3.4% to UAH 12.67 and moving closer to our target price of UAH 15.00 per share. Although CentrEnergo has historically had poor financial results for 4Q, the company’s reported earnings per share of UAH 5.67 for 9M17 still looks strong. DonbasEnergo (DOEN) shed 0.5% to UAH 18.25, ignoring the overall uptrend on the market.
The main London-listed Ukrainian companies also participated in the rally, with Ferrexpo (FXPO) gaining 1.8% to GBp 293 and MHP (MHPC) advancing by 0.9% to USD 11.50 per share.
On the Warsaw Stock Exchange, Agroton (AGT) recovered 20% to PLN 4.58 while top liquid name Kernel (KER) slipped 1.0% to PLN 47.50.
The hryvnia was looking a bit shaky ahead of the long 5-day New Year holiday weekend, declining by 0.6% against the dollar to close at 28.10 UAH/USD. On the upside, we believe that the hryvnia could strengthen toward the end of the winter season, when there will be less pressure on the country’s balance of payments from natural gas imports.
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