Stock and bond markets have reacted positively to the appointment of Ukraine’s new coalition government, which embraces the pro-Russian Party of Regions, president Viktor Yushchenko’s Nasha Ukraina party, and the Socialists and Communists.
The PFTS stock index rose by 2.3% on Thursday and 1.6% on Friday after a prolonged period in the doldrums. Yield on the government’s benchmark 2013 eurobonds fell from 7.2% to 6.4%.
Konstantin Fisun, head of research at Ukraine-based investment house Concorde Capital, said: “Most stocks were falling between May and July, and now market sentiment has turned round, in response to the end of the political uncertainty.”
The new government would be pro-business, and Ukrainian producers and exporters would benefit from the Party of Regions’ dominance of economic posts, said Fisun. Doubts about the government’s durability stem from disagreement between member parties about foreign policy, and in particular NATO membership.
Alexander Sandul, managing director at Foyil Securities, another Ukrainian brokerage, said investors were right to be buoyed by the new coalition. “Some people say we are ‘moving forward with our back’, as [prime minister] Viktor Yanukovich has returned [to the job he was doing in 2004 before the ‘Orange revolution’].
“But this government is different. The Party of Regions has changed and embraced many of the ‘Orange revolution’s values. And the Socialist Party will attract as a controlling factor.” The return of Mykola Azarov as first deputy prime minister in charge of the economy was positive, Sandul said.