Investors in Ukrainian assets have been well rewarded on the back of the country’s improved economic performance. The local currency UX equity index is up 22 percent year to date while the Euro denominated WIG-Ukraine Index is 33 percent higher. That compares with a 15 percent gain in the MSCI EM Index over the same period. Debt instrument investors have also shared in the gains with, for example, the yield on Ukraine 2020 sovereign debt dropping from 9.8 percent at the start of the year to 8.2 percent in early October. The performance of some corporate issues has been even better with, for example, the yield in the MHP 2020 Eurobond dropping from 12.1 percent to 9.4 percent in the same period.
The question now is whether the solid progress achieved in the economy over the past 12 months can continue, and drive asset prices even higher, or whether Ukraine is about to enter a more difficult and dangerous phase that may disrupt the recovery and again boost the perception of investment risk.
