EAVEX Weekly

January 15, 2018

Kyiv-listed stocks posted their largest one-week gains in more than three years last week amid speculation that cash from the state’s reformed pension system could eventually find its way into the local equity market. Although the devaluation of the hryvnia by around 10% against EUR/USD since the start of December should be taken into consideration for UAH-denominated stock prices, the market growth has nonetheless substantially outpaced the deval. We assume that investor optimism is related to the prospect of a quick introduction of the so-called “second level” pension system that has already been approved by Parliament. This terminology refers to a contribution-based pension system in addition to Ukraine’s longtime “solidarity” pension system. The budget of the State Pension Fund for 2018 was finalized at UAH 346bn (USD 12bn) with a whopping deficit of almost UAH 140bn (USD 4.9bn), which equivalent to around 4.3% of GDP. The huge pension fund deficit remains Ukraine’s largest problem