High country risk in Ukraine do not stop foreign funds
The largest holder of the Ukrainian bonds -U.S.investment fund Franklin Templeton in the first quarter of 2014 increased the share of bonds in its portfolio of Ukraine to almost 5%, according to an official statement of the fund. Earlier in its portfolio of such securities was only 2%. Taking into account the investment fund of the European partners of Franklin Templeton its total fund investment in Ukrainian debt in February counted $ 6.4 bln (about 70 bln USD).
Sergei Lyashenko, project manager of Cbonds.Info in Ukraine and other CIS countries, said that Franklin Templeton began ransom of the Ukrainian bonds to maintain their prices, so - to avoid devaluing the previously made investments.
Franklin Templeton left behind nearest rivals in the number of the Ukrainian bonds in its portfolio. For example, the five largest holders also include: Blackrock with investment volume of $ 292 mln, T Rowe - $ 106 mln, Invesco - $ 90 mln, Pictet - $ 84 mln
"If we consider the investment directions of Franklin Templeton Investments, then this fund invests in many developing regions or regions with the potential risks, such as those in South America," - said the Head of Strategic Development IBI-Rating Igor Andrusik.
T Rowe and Invesco investment funds strategy are more restrained, said the expert, but also a lot of these funds invest in developing regions in order to maximize their profits. "And for such a monster of investment as Blackrock (assets of more than $ 4 trillion) even the loss of $ 292 mln invested in the Ukrainian assets will be irrelevant, since it diversified its assets to compensate the payoff, "- said Andrusik.
Pictet is the only European company among the five largest holders of the Ukrainian Eurobonds and, according Andrusik, "the most restrained in its investment strategy."
For foreign funds there is a good reason to invest - a high yield of the Ukrainian bonds. "Yield of the Ukrainian government debt now is significantly higher than, for example, debt of Spain. Two-year bonds traded in this country with a yield of 0.7% per annum, while the Ukrainian characterized double profitability,"- said the analyst of the investment holding company "Finam" Anton Soroko. Indeed, the yield on the Ukrainian bonds now exceeds 10%. That is what attracts funds that want to increase the yield of their portfolio,- agreed director of the rating agency "Standard Rating" (Ukraine) Andrey Nikitin.
Its geopolitical risks today have a major influence on the formation of the Ukrainian bonds yield, and these risks are much higher then socio-economic ones of Greece and Spain,- added Andrusik. In terms of risk of the Eurobonds,Ukraine has been compared to Venezuela,- added the head of the analytical department of the investment company "Eavex Capital" Dmitry Churin. Greece has already started to come out of the protracted crisis in early April and was able to post five-year sovereign bonds on the international market with a yield of less than 5 %, which is not comparable with the yield of five-year Ukrainian Eurobonds at 10% .
Financiers are expected to reduce the profitability of securities after Ukraine receive promised financial assistance from West. "I think that after giving the whole package bailout yield market sovereignsUkrainedecline by about 1.5 times," - said Nikitin . At the same time due to the need to replenish international reserves , external debt will rise in the future. According Andrusik , foreign investors are still waiting , " They are waiting for the election and, of course , cash tranches. In the case of stabilization of the political situation in the country after the elections and the creation of an enabling environment for investment , the demand for Ukrainian bonds can grow. " But invest in them will be primarily by those who can afford to bear the risks of speculative nature, the expert added . While no significant changes in external borrowingUkraineis not expected before the end of this year or even next year . "There is still not excluded a technical default ofUkraine", - said Soroko. As of January 1, the total amount of external debt ofUkrainetotaled $ 37.4 bln, which is actually twice the size of its gold and forex reserves.
Likely in the future we will see a number of placements of sovereign securities, such Eurobonds under aU.S.government guarantee. "The next month is likely that the Treasury will enter the foreign markets with the placement of $ 1 bln under theU.S.guarantee, which were obtained in the framework of international aid - predicted Churin. - Taking into account the fact that the next issue of bonds will be guaranteed by a country with a credit rating of AAA, the coupon rate is likely to be at the rate of 4%."
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