Over the past year, investors had many reasons to worry. The fact that the bull market has been going on for more than 10 years is already a cause for concern for many investors. However, there were other significant factors for excitement - these were concerns that a trade war would lead to a world recession, and a wave of large-scale protests around the world that reminded of political risks, and finally a significant increase in geopolitical tension in the Middle East at the end of the year. Nevertheless, still good economic growth in the USA and China, as well as still stimulating monetary policy of the main central banks, did their job. The S&P 500 index added 2.9% in December and closed the year at a historic high with a result of + 28.9%. However, changes in the financial market of Ukraine can be called even more noticeable. UAH is the leader in growth among world currencies (although this is just an ambiguous achievement). Annual inflation fell to an extremely low level of 4.1% for our country. Yields on dollar Eurobonds decreased from 10% to 6%, and on UAH government bonds from 17% to 10%. The cherry on the cake, perhaps, was the signing in December of a new gas contract with the Russian Federation, which removes the risk of loss of transit revenue, in addition, Ukraine received from "Gazprom" a payment of 2.9 billion dollars for the vessels won by "Neftegaz".
We see all the prerequisites for the current positive economic momentum in Ukraine to continue and develop. Given the sharp drop in yields on the Bonds market and the cleansing of banks of bad assets during the 2008 crisis, we expect a significant revival in lending. Our basic scenario assumes continued cooperation with the IMF, the next tranches of which will be an important signal for investors about the continuing stability of Ukraine and will probably push the rates on Ukrainian debts even lower. Land reform will also stimulate both economic activity and the development of the financial sector. We believe that in 2020 the stock market has every chance to revive as investors look for an alternative to already less profitable government bonds. Of course, risks, both external and internal, are always preserved, but it can be argued that today Ukraine is best protected from them in the last decade.
