Last week, Ukrainian CDS quotations continued to decline, this week from 675.4 b.p. to 611.6 b.p. Thus, Ukrainian CDS quotations have been declining for the last four months – from 1500 b.p. at the end of November 2009 to the current 612 b.p. International rating agencies’ upgrades in the sovereign rating for Ukraine and ratings outlook continue to positively influence investors’ assessment of Ukrainian sovereign risks.

Last week, Ukrainian CDS quotations continued to decline from 812.8 b.p. to 730.7 b.p. Stabilization in the political arena of Ukraine continued to positively influence investors’ assessment of Ukrainian sovereign risks. The formation of the new Cabinet and sovereign rating upgrade by the S&P international ratings agency should drive a further reduction of Ukrainian CDS.

Last week, Ukrainian CDS quotations continued to decline, this time by 71.2 b.p., from 982.1 b.p. to 820.9 b.p. Stabilization in the political arena of Ukraine continue to positively influence investors’ assessment of Ukrainian sovereign risks. The spread between Ukrainian CDS and those of Argentina and Venezuela widened to 249.1 b.p. and 200.1 b.p. respectively.

Last week, Ukrainian CDS quotations declined by 51.8 b.p. from 980.2 b.p. to 928.4 b.p. The main influence on investors’ attitudes to Ukrainian risks was news from the political arena, including the new President’s inauguration (held February 25) and a decline in investors’ apprehension about further political destabilization in Ukraine.

Last week, Ukrainian CDS quotations declined by 1.7 b.p. from 980.8 b.p. to 979.1 b.p. Investors’ apprehension about further political destabilization in Ukraine after the second ballot of the presidential election has begun to decline. In our view, this should result in a lowering of Ukrainian CDS again next week.

Last week, Ukrainian CDS quotations took a 50.4 b.p. jump from 919.8 b.p. to 970.2 b.p. Such an increase occurred due to investor apprehension in relation to further political destabilization in Ukraine after the second ballot of the presidential election. Despite such a jump, Ukrainian CDS are still trading lower than Argentina’s and Venezuela’s CDS.

Last week, Ukrainian CDS quotations showed a decline of 37.3 b.p. from 956.7 b.p. to 919.4 b.p. Thus, Ukrainian CDS quotations moved to occupy the third place in the world, after Venezuela’s President reported about the nationalization of its retail network.

In this report we examine selected Ukrainian stocks that are still undervalued and look interesting for potential investors based on their strong fundamentals. The macroeconomic situation has become stable with a better outlook for the end of year compared with the figures which we predicted in 1Q09. The second IMF loan tranche played a positive role of increasing investor confidence in the local stock market. In our view, carefully chosen companies can be found with growth and value potential. We recommended to BUY such companies in the agriculture sector; MAYA GR, KER PW, MHPC LI; in energy PREN UZ, DOEN, UZ; in machinery MSICH UZ; in banking USCB UZ. We recommend to SELL positions in NFER UZ because the company could be going bankrupt. For each stock we provide a description of the price triggers that will help investors better understand the drivers which could influence possible stock price movements.

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.