Rising political tensions after the presidential election has Western businesses preparing for the worst
Rising numbers of protestors and political tensions in Ukraine after the Nov. 21 presidential election has Western businesses with interests in the nation bracing for the worst, and has brought many business activities to a halt.
Moreover, Ukrainian government Eurobonds are beginning to slide amidst fears of long-term political instability and a government default on foreign debt.
A market advisory report issued on Nov. 24 by Austria’s banking and financial services group Raiffeisen GroupZentralbank Oesterreich AG described the aftermath of the Nov. 21 second-round presidential vote as “worse than feared.”
“The election’s outcome was thrown into big doubt after many irregularities and vote violations were allegedly cited by international observers and the opposition. As a result, the opposition’s supporters took to the streets en mass and the situation quickly transformed into a serious one – the worst political stand-off ever seen in Ukraine,” reads the report.
“Whatever Ukraine’s opposition does and whatever is in the mind of the Ukrainian authorities, we believe this stand-off is escalating dangerously, and thus far, a violent break-out may not be excluded,” the report reads.
“Our understanding is that a peaceful resolution, which may be likely, is becoming all the more illusive,” the report continues.
On Nov. 22, the PFTS, Ukraine’s main stock and bond trading exchange, shut down at 3 p.m., citing dwindling trading volumes and overall market activity.
Trading on the PFTS was temporarily opened at 11:00 a.m. on Nov. 23, only to be closed one hour later. The same thing happened on Nov. 24.
The European Business Association, a Kyiv-based business advocacy group, expressed its solidarity with the concerns expressed by the European Union and urged Ukrainian President Leonid Kuchma to ensure that the election process is completed constitutionally and democratically.
Meanwhile, Ukrainian government Eurobonds have begun to slide, says Dmitri Shemetilo, an analyst at the London offices of Commerzbank Securities.
“Ukrainian bonds are losing value mainly on rumors and fears of civil war,” Shemetilo said.
“Today (Nov. 24) the prices went down five percent. The benchmark Ukraine 13 is traded now close to par, down from 105.77 on Nov. 18,” he added.
“The political situation remains tense.
“It looks like the work of the nation’s parliament will be blocked for a considerable period of time, which could have a potentially negative impact on the economy, currency and inflation,” Shemetilo added.
