In May, markets remained unsettled, but panic as a whole is not there. The recent rise in the dollar and interest rates around the world triggered a wave of bond sales of developing countries. This wave has exposed weaknesses - economies with large current account deficits and large external debts, in particular, Turkey and Argentina, where small currency crises occurred. The oil was poured into the flames by populists who came to power in Italy, who now promise to spend more money than they can afford, that the Italian debt market has collapsed and even weakened the euro. Now the Ukrainian shares were also sold, the UX index declined by 6% in a month. But the S & P 500 index for May, against the backdrop of growing protectionism in the US, even grew by 2.4%. While emerging markets are getting used to rising interest rates and falling rates of their currencies - the US economy continues to show steady growth, and US companies - a record profit in the first quarter, which, among other things, is due to Trump's tax reform.
Over the past six months, the macroeconomic external background for most emerging markets has deteriorated sharply, but the reaction of developing economies has been different. If most countries are now in the late stage of the economic cycle, then in Ukraine the recovery of the economy and lending is just beginning. If in other countries speculative capital has come into significant volume in recent years and these flows have now unfolded, then in Ukraine we practically do not observe these phenomena. In addition, Ukraine already has an existing IMF program, according to which the country can receive financing regardless of the unrest in the capital markets. In other words, Ukraine will likely continue its slow economic growth even if the external background worsens and the problems in other emerging markets worsen. In June, we expect good news about the adoption of an anti-corruption court compatible with the requirements of the IMF and believe that this may spur demand for Ukrainian assets.
