OREANDA-NEWS. August 6, 2012. When interpreting the data released in the Overall review of the Ukrainian stock market for January-June 2012, Ms. Olena Shcherbakova, Director of the NBU General Department of Monetary Policy, pointed to an upward trend in T-bill trading volumes in the secondary market.

According to her, an increase in T-bill trading volumes can be attributed to the expansion of the primary T-bill market and an attractive level of T-bill yields. Furthermore, T-bills are regarded as less risky than securities issued by private issuers.

“According to recently released data, the portion of transactions in securities circulating freely in the stock market does not exceed 10.96% of the total turnover, with transactions in government securities accounting for the largest share. In January-June 2012, the Ministry of Finance of Ukraine placed T-bills worth UAH 28,923.8 million, USD 2,112.5 million and EUR 316.6 million. As of 1 July 2012, the total T-bills in circulation amounted to UAH 187,745.0 million (as of 1 July 2011 – UAH 156,530.0 million),” said Ms. Olena Shcherbakova.

According to the latest available data, In January-June 2012, the total value of agreements, which were concluded in the organized secondary market for government T-bills, reached UAH 60,604.6 million, as compared with UAH 39,189.3 million recorded in the same period of the previous year. The average weighted T-bill yields under these agreements had ranged from 11.11% to 12.87% (they ranged from 8.46% to 9.49% in the respective period of 2011). The Director of the NBU General Department of Monetary Policy reminded that only 16 banks – primary dealers – had been granted the right to participate in the primary auctions on Treasury bill placement since 19 February 2012. The remaining investors willing to invest their funds in government T-bills have to purchase these securities in the secondary market.

When carrying out an analysis of developments in the domestic stock market, Ms. Olena Shcherbakova pointed out that 10 organizers of securities trading currently operate in Ukraine. The largest organizer of securities trading is the FSTS Stock Exchange. The FSTS Stock Exchange Index is a benchmark index of this trading system calculated on the basis of market prices of ordinary shares admitted to listing and trading on the FSTS Stock Exchange.   

“In January – June 2012, the FSTS Stock Exchange index, which reflects prices fluctuations in the most liquid enterprise shares, fell by 172.12 points (from 534.43 to 362.31 points), or by 32.21%, compared with the start of 2012. As of 1 July 2012, the FSTS Stock Exchange index stood at 362.31 points. As of 1 July 2012, 1,140 securities were listed on the FSTS Stock Exchange, including 529 shares, 334 corporate bonds, 144 T-bills, 113 IF securities and 20 municipal securities,” reported Ms. Olena Shcherbakova.

According to her, in January-June 2012, trading in T-bills, corporate bonds, shares and municipal securities expanded, as compared with the respective period of 2011, totaling UAH 50.6 billion (In January-June 2011 – UAH 38.6 billion).

“In January-June 2012 as compared with the respective period of 2011, trade grew in: T-bills – by 35.1% to UAH 43,813.2 million (in January-June 2011 – UAH 32,427.4 million); corporate bonds – by 34.1% to UAH 6,514.7 million (in January-June 2011 – UAH 4,858.1 million); dropped in: shares – 4.4 times to UAH 297.5 million (in January-June 2011 – UAH 1,302.0 million); municipal securities – 5.1 times to UAH 6.6 million (in January-June 2011 – UAH 33.6 million),”  said the Director of the NBU General Department of Monetary Policy.

“In January-June 2012, transactions in T-bills accounted for the largest share of transactions carried out on the trading facility of the FSTS Stock Exchange. Trading in T-bills totaled UAH 43.813,2 million, making up 86.4% of the total volume of transactions carried out on the trading facility of the FSTS Stock Exchange ", she added.

However, Ms. Olena Shcherbakova noted that despite an increase in transactions in T-bills carried out on the Stock Exchange, there is every reason to believe the stock market remains closed: approximately 89% of all transactions are carried out in the so-called private regime. Furthermore, a shortage of quoted securities (securities circulating freely in the stock market) and transactions in these securities makes it difficult to establish the fair value and profitability of domestic securities.

“This makes it impossible to use these securities as liquid collateral, giving us less room to manoeuvre when carrying out refinancing transactions and performing transactions in the open market. It is for this reason that the money supply and real economy are not sensitive enough to changes in interest rates. The National Bank of Ukraine contributes to the development of the corporate bond market by accepting these financial instruments as collateral in refinancing transactions,” concluded Ms. Olena Shcherbakova.