Teresa Telenovela - The close-call vote between Ukrainian presidential candidates Viktor Yanukovych and Yulia Tymoshenko has boosted the risk of holding the country's debt and currency, analysts said Monday.
Ukrainian sovereign debt was yielding 11.10% Monday, compared with 10.59% Friday, indicating "some tension" surrounding the election that took place Sunday, broker BG Capital said. The difference between the rates at which banks buy and sell the hryvnia in exchange for dollars also expanded a "little bit" compared with Friday, according to BG Capital.
"Given the strong performance of Ukraine credit over the past couple of weeks and its resilience during the recent market weakness, risks seem skewed to the downside at the moment," Barclays Capital said. "Early parliamentary elections seem likely if a narrow Yanukovych victory is confirmed, potentially delaying political stability and negotiations with the International Monetary Fund further," the bank said.
So far, Mr. Yanukovych has 48.6% of the vote, or slightly more than Prime Minister Tymoshenko's 45.8%, the Central Elections Commission said, based on results from 86.7% of polling stations. Yet Ms. Tymoshenko, known for her role in the Orange Revolution that overturned Mr. Yanukovych's victory in 2004, has shown no signs of conceding.
The UX Index of local Ukrainian stocks declined slightly, falling 0.2% to 1656.94 after earlier rising as much as 0.8%. Oil company Ukrnafta sank 2.6%. In credit derivative markets, Ukraine's five-year sovereign credit-default-swap spread—a key measure of credit risk—was steady at 9.46 percentage points, but activity was muted, according to CMA DataVision.
CDS are over-the-counter derivatives contracts that function like a default insurance for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries.
Even if the election hurts Ukraine's nascent financial markets, Russian companies, many of which own assets or do business in Ukraine, may benefit from the apparent victory of a more pro-Russian leader like Mr. Yanukovych, UniCredit SpA said.
"In particular, we expect that a win by a relatively pro-Russian candidate would be positive for Gazprom, which could benefit from a reduction in the political component of annual negotiations over the gas price and transit tariffs to Europe," said analyst Vladimir Osakovsky.
—Clare Connaghan contributed to this article.
Ukrainian sovereign debt was yielding 11.10% Monday, compared with 10.59% Friday, indicating "some tension" surrounding the election that took place Sunday, broker BG Capital said. The difference between the rates at which banks buy and sell the hryvnia in exchange for dollars also expanded a "little bit" compared with Friday, according to BG Capital.
"Given the strong performance of Ukraine credit over the past couple of weeks and its resilience during the recent market weakness, risks seem skewed to the downside at the moment," Barclays Capital said. "Early parliamentary elections seem likely if a narrow Yanukovych victory is confirmed, potentially delaying political stability and negotiations with the International Monetary Fund further," the bank said.
So far, Mr. Yanukovych has 48.6% of the vote, or slightly more than Prime Minister Tymoshenko's 45.8%, the Central Elections Commission said, based on results from 86.7% of polling stations. Yet Ms. Tymoshenko, known for her role in the Orange Revolution that overturned Mr. Yanukovych's victory in 2004, has shown no signs of conceding.
The UX Index of local Ukrainian stocks declined slightly, falling 0.2% to 1656.94 after earlier rising as much as 0.8%. Oil company Ukrnafta sank 2.6%. In credit derivative markets, Ukraine's five-year sovereign credit-default-swap spread—a key measure of credit risk—was steady at 9.46 percentage points, but activity was muted, according to CMA DataVision.
CDS are over-the-counter derivatives contracts that function like a default insurance for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries.
Even if the election hurts Ukraine's nascent financial markets, Russian companies, many of which own assets or do business in Ukraine, may benefit from the apparent victory of a more pro-Russian leader like Mr. Yanukovych, UniCredit SpA said.
"In particular, we expect that a win by a relatively pro-Russian candidate would be positive for Gazprom, which could benefit from a reduction in the political component of annual negotiations over the gas price and transit tariffs to Europe," said analyst Vladimir Osakovsky.
—Clare Connaghan contributed to this article.
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