The Ukrainian Government has approved the 2009 privatization list. The major names are the same again: fixed-line communication operator Ukrtelecom [UTEL], turbine producer Turboatom [TATM], ammonia and carbamide producer and operator of ammonia pipeline Odesa Portside Plant (OPP), 60% shares in each of four electricity generators (CEEN, DNEN, DOEN and ZAEN) and 25-27% shares in six electricity distributors (CHEON, LVON, ODEN, POON, PREN and Sumyoblenergo). The government didn’t specify in which way the privatization process will be arranged. It also hasn’t decided how much it expects to gain from the privatization of all the above-mentioned companies. However, it has already urged the State Property Committee of Ukraine to gain UAH 3 bln from privatization in the first quarter of 2009.

While Ukrainian equities, similar to most of their foreign counterparts, are demonstrating negative dynamics with the PFTS Index’s YTD fall of 76.9%, Ukrainian fixed income instruments demonstrate attractive investment opportunities for both domestic and foreign players. In this paper we present the top investment ideas about what we believe to be the most secure fixed income investments with the highest yield.

Despite being traditionally a low activity month on the PFTS, August 2008 was marked by another wave of unprecedented sales of Ukrainian stocks, lowering the PFTS index to its 52W low 513.84 points by the end of August with equity trading volumes of USD 138 mln being 29% lower compared to July 2008. As American and European stock markets have more or less digested the negative impacts of the credit crisis – Dow Jones Industrial Average +1.92% MoM, S&P 500 +1.79 MoM, FTSE 100 index +4.70% MoM, CAC 40 index +3.67% MoM – Ukraine emerges as considerably undervalued with the current PFTS level 533.68, equaling the level of January 2007 that preceded the 135% rally of 2007. In our previous strategy document in August “Fundamental factors – real drivers for stock prices”, we supposed two scenarios of market development: at the 620-660 bps level and the 550 bps level (a negative scenario). We see that the market has dropped significantly below our negative scenario to the 513.84 level. We saw several factors which impacted on this drop: traditionally low stock market activity in August; the Ukrainian position in the conflict between Russia and Georgia; still high EOP inflationary expectations and the Ukrainian credit crunch; influence of the global stock markets and, specifically, declines on the US, European and Russian stock markets during the year. The bearish trend continued dominating in August despite all the positive news on the real economy and industry, with fundamental changes once again showing the strong dependence of the Ukrainian stock market on global stock market trends. We believe that the market will follow with a decrease in September due to the fact that there are no available strong internal and external factors capable of returning the market trend towards growth.

Based on the stock market fall by 44% YtD and the current low liquidity, we decided to introduce a monthly strategy report for our clients, where we present our visions about the next month on the Ukrainian stock market. We believe that this material will help investors to better understand the situation on stock market, the macro conditions, and also find our top-picks based on our analysis