Battered Ukraine Stocks Get Dubious Label From Analysts

KIEV, Ukraine -- Ukraine's equity market has become one of the world's worst-performing exchanges, following a year-to-date decline in shares of more than 50%, leading analysts to dub it the "China of eastern Europe."

Ukraine's benchmark PFTS index fell 5.5% to close at 513.84 Thursday, because of tensions in the region. Russia's invasion of Georgia has led many to fear that Ukraine might suffer the same fate, since, like Georgia, it is frequently at odds with Moscow and has a significant Russian-speaking population.

This has taken the market's total year-to-date decline to more than 50%, leading to the comparison to stocks in China, where the benchmark Shanghai Composite Index has declined about 55% this year.

Some of the worst hit stocks have been in the steel industry over fears the companies will require increasing government support. On Wednesday shares in Avdeevka Coke fell 7%, and dropped an additional 2% Thursday, while shares in Enakievo Steel fell 10% Wednesday but recovered to rise marginally Thursday.

The share-price declines also match the drops in neighboring Russia. Russian equity valuations have also been hit hard this year, with Russia's leading MICEX index losing 19% of its value in the past month.

However, the sharp selloff in Ukrainian equities has some analysts forecasting a rebound in valuations, with Alfa Bank projecting a rally within the next two months.

In a report Thursday, calling Ukraine the "China of eastern Europe," Alfa Bank analyst Denis Shauruk said the fall in valuations offered investors a good opportunity to pick up Ukrainian stocks on the cheap.

"For many, this may look like a disaster, but for those who view underperforming stocks and indexes as the perfect buying opportunity, this is a clear signal to buy," he said.

Source: The Wall Street Journal