Odessa Financial Forum – key insights

On September 24th-25th  the Odessa Financial Forum was held at the Hotel Bristol. The event, organized by the Association “Ukrainian Stock Traders” (AUST), in cooperation with NGO “ACI Ukraine”, gathered more than two hundred  participants from the financial community of Ukraine, Europe, and the United States.

Warsaw Stock Exchange and American Chamber of Commerce in Ukraine were the partners of the Odessa Financial Forum, and ICU company was the general sponsor of the Forum.

Media-partners: LIGABusinessinform, magazine FOCUS, Internet portals Delo.ua, Financial ClubThe Left Bank and the Fixygen, TV partner — Ukraine Today, the special partner — Thomson–Reuters.

Information support — CbondS and TRDATA.

The US Ambassador to Ukraine, Geoffrey Pyatt, and the Ambassador of Canada to Ukraine, Roman Vashchuk, took part in Odessa Financial Forum. The President of Ukraine Petro Poroshenko, and the NBU Governor Valeria Gontareva, welcomed the attendees in their video address. The Forum was also attended by Deputy Head of Presidential Administration of Ukraine Dmytro Shymkiv, the Head of the Odessa Regional State Administration, Mikheil Saakashvili, and the Advisor to the Head of the Odessa Regional StateAdministration Alexander Borovik.

The President of Ukraine Petro Poroshenko delivered a welcoming video address to the Odessa Financial Forum audience. He spoke about the steps that have been implementedand scheduled by the state to improve the investment climate.  Mr. Poroshenko stressed that the greatest benefits could receive the first investors.

NBU Governor Valeria Gontareva spoke about the efforts to engineer a grand fix of the Ukrainian bank system, cement macroeconomic, financial stabilization, and eventually re-start lending by the banking sector.

Head of the Odessa Regional State Administration, Mikheil Saakashvili, shared his plans to transform the Odessa region to the model region of Ukraine, and put special emphasis on the “Odessa reform package”.

Deputy Head of Presidential Administration of Ukraine, Dmytro Shymkiv, highlighted the importance of successful debt restructuring performed by the Ministry of Finance of Ukraine.

On day one of the  Odessa Financial Forum, the panel, with  Andriy Hunder, President of the American Chamber of Commerce, as the moderator, was devoted to «Macroeconomic and financial situation in Ukraine, current conditions and outlook».

Тіmothy Ash, an experienced expert  of Central and Eastern Europe markets who had recently joined  Nomura International, signified optimism about the recovery of macroeconomic indicators in Ukraine :

“This country can really surprise everyone – and, obviously , in the short term”. He also expressed his gratitude, and satisfaction, with the level of qualification the NBU and the Finance Ministry teams he dealt with: “It’s the best personnel of these institutions ever!”

Olexandr Valchyshen, Head of Research Department in ICU, slightly displelledthe optimistic mood:

“Yes, we have a macro stabilization, but we have to realise how it was achieved. Recent statistical indicators of investment into fixed assets in relation to GDP is only around 11%. As far as I know, this is a historical low.“

Head of Monetary Policy and Analysis Department, Serhiy Nikolaychuk, drew attention to the importance of banking sector reforming:

“A typical example is Turkey, which in the early 2000s also dramatically came to the cleansing of the banking system, implemented it even faster than Ukraine – thus, made a great contribution to economic growth.”

Dominique Menu, Country CIB Ukraine&Kazakhstan, BNP Paribas said:

“Despite mostly negative news background around Ukraine, I am optimistic. But success depends on everybody’s efforts”.

Another panelist, the Deputy Head of Presidential Administration of Ukraine,Dmytro Shymkiv, spoke about the Presidental Reform Program of Ukraine towards the EU “Strategy 2020”: “Yes, our aspiration is membership, but our target is qualification…”. Mr. Shymkiv stressed the conduction of structural reforms in the economy of Ukraine as both a tool for achieving the goal of EU membership, and the way to build a healthy economy in Ukraine.

The next panelist, Vadym Khramov, Bank of America Merill Linch, pointed out that in Western financial communities much optimism doesn’t dominate towards Ukraine, but only a certain hope for optimism.

“We do not expect instant economic recovery, hard work is ahead.” – he said.

Panel two on the first day  of Odessa Financial Forum was moderated by Elena Voloshina, Head of the Intrnational Financial Corporation in Ukraine. The topic of the panel is quite relevant: “How to attract an investor? Outlook for economic growth, financial stability and public debt sustainability in Ukraine from the investors‘ perspective”.

Olexsandr Borovyk, the Advisor to the Head of the Odessa Regional State Administration, spoke about the “Odessa Reform Package”, developed by Saakashvily’s team,which is not only for Odessa, but also for the whole country.

“No matter, whether the “Odessa reform package” is for Odessa region, or some other similar packages, but the reforms we propose should be performed necessarily. The reforms should turn this country into a nation of entrepreneurs, a nation of people who are independent of the bureaucracy, which can do business safely – and there is no alternative to this.“

In turns, Timur Khromaev, the Head of the National Securities and Stock Market Commission, emphasized the desire to get back the investors to Ukraine:

“Our Ukrainian investor can do a lot. There are 8,000,000 investors in Ukraine. It’s, unfortunately, the remains of privatization , but we had a tremendous start.”

Makar Paseniuk, Managing Director of ICU, described the paradoxical situation where the good healthy Ukrainian companies are reluctant to be sold, or attract debt capital, because they believe that the macroeconomic situation in the country is unfavorable, and so they should wait.

“But, at the same time the potential buyers are interested in them just because they understand that in such a situation very interesting businesses can be purchased for very little money. So this is the paradox “- said Makar Paseniuk.

Kostiantyn Mahaletskyi, Horison Capital partner, described a success story of his company, which is quite successful on the Ukrainian market and which, for example, against the devaluation of the Belarusian currency, got income from investments in this country.

“We have seriously increased investments in the IT sector. In addition, we have Ciklum, we have invested in Rozetka, we have also  other developments, both in this field and in others.”

Well-known and successful private investor who has got about 15 years of experience with the Ukrainian sovereign and sub-sovereign debt Andryi Pavlichenkov said:

“Over the past few years Ukraine has been changed  greatly, I have never seen the country in such a condition before. Reformist government team, which has done a lot towards the stabilizing of the economy and restoration of cooperation with the IMF, has been set up, crazy social programs, that during the last 20 years were the sacred cows, have been abolished, structural reforms are in progress”.

Elena Voloshina, the Head of IFC in Ukraine, summing up the panel, said that the position of the IFC coincided with the expectations of the private sector:

“We do not have anyone to lend, we also do not have to give capital to anyone, and we are actually engaged in support work with existing customers at present. But we can do much more.”

Ms. Voloshina believes that the thing Ukraine is in need of now – is the correct and legitimate privatization:  “because after the privatization of Kryvorizhstal there were a great number of potential investors in the country.”

Day two of the Forum started with the panel discussion on the issue: ” Reforms of the Ukrainian capital market infrastructure”.  The moderator Andryi Pasechnikov, CEO of TRDATA, noted the right people had a lot of enthusiasm and opportunities to change the country for the better.

Brian Tylor, BTA consultant, started his skype-speech with an evaluation of the depository system of Ukraine.

“Ukraine should strive to merge the Central Depository, the NBU depository and the Clearing Centre for their joint work”. – said the expert.

A brief outlook of the Government Bond and certificates of deposits markets, as well as prospects of launching of new financial instruments, was made by Kostiantyn Stetsenko.

Oleh Churiy, Deputy Governor of the National Bank. Hespoke of the prospects of reforming the foreign exchange law and the opening of the global depository account at the NBU depository to facilitate access to the Ukrainian market of foreign investors.

Michal Lukac, kdpw_, shared the Polish experience of building of the central depository.

Yurii Shapoval, acting Chairman of the Board of the Clearing Centre said: “The best step in infrastructure building in Ukraine is there will be the merge of the Central Depository and the Clearing centre with providing the mandatory possibility for exchanges to build their own central counterparty, launch clearing system, and ensure adequate competition of exchange technologies.”

The NDU Chairman, Hennady Zhurov, noted that clear understanding of the objectives to which Ukraine is moving in the financial sector is absolutely required for the successful development of the stock market infrastructure.

«Developing of financial instruments for domestic capital market, fostering local investor base” was the theme of the panel four of Odessa Financial Forum.  Anton Pasechnikiv went on to lead the discussion.

Deputy Chairman of the NBU, Oleh Churiy, made a presentation on changes in the procedure for transactions with standard tools of NBU liquidity management. Deputy Minister of Finance of Ukraine, Artem Shevalyov, spoke about the prospects of government securities issue in hryvnia and foreign currency. Implemented and scheduled steps of reforming of the insurance market of Ukraine were presented in the speech of the Board member of National Commission for State Regulation of Financial Services, Oleksandr Zaletov.

Head of Corporate Finance UkrSibbank BNP Paribas, Serhiy Yahnych, recalled the key problem in attracting of foreign investment – legislative prohibition on repatriation of profits and advised to give up the practice of primary dealer. Director of ICU debt capital markets, Ruslan Kilmukhametov, in turn, believes that:

“The real driver of the market in the near future may become public companies, international financial institutions as proactive issuers … But this step must be the political will.”

Panel four, which closed the Odessa Financial Forum, raised the problem “OTC market for foreign-exchange, swaps and derivatives, introduction of market standards ISDA / GMRA, the Model Code. The moderator of the panel was Pavel Kozak, the Chairman of ACI Ukraine.

Dmitro Lazarev, a Board member of ACI Ukraine, spoke about the Model code of professional participants of ACI, which is available on the website of the association and that has already translated into Ukrainian this year.

Tetjana Popovich, the Director of the capital markets of Alfa Bank Ukraine, in her speech put emphasis on the opportunities and outlook of the derivatives market in Ukraine.

Ihor Olekhov, Baker & McKenzie, shared the experience of regulatory development of derivatives in accordance with European legislation.

In turn, Konstantin Stetsenko, Managing Director of ICU, noted: “The issues of risk management and hedging are extremely important for our market, and the best solution for their implementation in the Ukrainian legal field is full implementation of EU directives.”

As the conclusion based on numerous reviews of the Forum it is obvious that Lviv Financial Forum 2014, and Odessa Financial Forum 2015 were the bright events on the national financial market and became the venues for discussion of a range of issues important for market participants, regulators, media, issuers, local and international investors.

There is a hope that this event was a perfect opportunity to draw attention to Odessa and Odessa region – the extremely important region not only for the future of Ukraine but the whole Central and Eastern Europe. We hope that, like last year, Lviv and this year’s Odessa events has made a great contribution to the development of the investment potential of Ukrainian regions.