Falling like ninepins in Ukraine

By bne IntelliNews October 1, 2012

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The slide of Ukraine's equities market into irrelevance is gathering pace, with Kyiv-based Renaissance Capital LLC announcing on September 28 that it is cancelling its licence to act as a trader and keeper of securities in the country.

The move by the company, a division of Russian-based emerging markets specialist Renaissance Group, comes hot on the heels of an announcement by fellow Russian investment bank Alfa Group on September 25, which dropped coverage of the market due to a lack of liquidity.

Renaissance Capital explained in a statement that it is pulling out of the market as there is basically nothing to do any more. "The main reason [for cancelling the licences] is the low attractiveness of the Ukrainian stock market," co-director of Renaissance Capital in Eastern Europe Roman Nasirov said.

The company retains a private equity investment into an agricultural holding and so will keep its office in Ukraine. However, it is now formally giving up hope of building a viable business in Ukrainian equities and has reduced the number of traders and investment bankers in the office over the last few years.

"We've been trying to gain a high volume of trading on the Ukrainian local market and fight for various rankings, but this is self-deception. We did not go to online trading for the same economic reasons, as this is at best an unprofitable business, and some companies simply subsidize it," Nasirov added.

While Ukraine's stock market has been amongst the best performing in the world several times over the last few years, it has sunk to new lows since the country was battered by the 2008 global crisis and President Viktor Yanukovych took the reins of power in 2010.

At the best of times, the UX index saw daily volumes peaking in the tens of millions, but Russian operations, although more used to the tens of billions seen at home, eyed potential, particularly in sectors such as agriculture, energy and consumer. However, with the economy gripped by crisis once more and the oligarchs behind Yanukovych grabbing up all they can, trading has now sunk to a little as a couple of million dollars a day. The joke doing the rounds is that you could move the market with a credit card.

That has equities players heading for the exit in droves. At the end of 2011, Georgia's BG Capital was the first to start the stampede when it closed its Ukraine office. Alfa sold off its Ukrainian subsidiary earlier this year and left the country officially last week.

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