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UPDATE 1-Ukrainian markets calm after first round of election

Published 01/18/2010, 06:20 AM
Updated 01/18/2010, 06:24 AM

(Adds details on stocks, quotes)

* Hryvnia, stock market calm on poll results, U.S. holiday

* Hryvnia may be pressured by cash demand in uncertain times

* Stock index may stagnate as investors await second round

By Natalya Zinets

KIEV, Jan 18 (Reuters) - Traders of Ukraine's hryvnia currency and stocks took Sunday's first round of a presidential election in their stride and said markets would be calm on Monday as the results appear to be in line with expectations.

Pressure on the currency may come in the coming weeks however if demand on the cash market rises from ordinary Ukrainians feeling uncertainty from the political situation while growth in the stocks index may stagnate, analysts said.

With over 80 percent of the vote counted, opposition leader Viktor Yanukovich leads with 35.76 percent and Prime Minister Yulia Tymoshenko had 24.72 percent. The two arch-rivals will now face each other in a run-off vote on Feb. 7.

A public holiday in the United States will ensure that volumes of trades in the markets will be low, dealers said.

By 1100 GMT the hryvnia had not moved, staying at Friday's level of 8.075-8.175/$. The central bank offered to sell dollars on Monday -- as it had done last week -- at 8.01/$.

"Everything is quiet and calm after the first round (of voting). There could be a slight strengthening of the dollar but the demand for the dollar is coming from ordinary people (i.e. the cash market)," one dealer said.

"The market will not be active today because of the (U.S.) public holiday," the dealer said.

Another dealer agreed that what pressure there was on the hryvnia in the coming days may come from the cash market. Ukraine's economy is highly dollarised and in times of uncertainty, ordinary people have tended to buy more dollars.

"As soon as the people come to buy dollars, then the demand of the people will create volatility and could raise the dollar. But if not, then things should be calm," another dealer said.

The central bank, which intervened practically on daily basis throughout last year to stem the hryvnia's weakness, has for months now sold dollars two days a week at special auctions specifically for the cash market.

Another factor pressuring the hryvnia may be sharply raised gas import prices from Russia -- up to $305.6 per 1,000 cubic metres in this quarter from $208.12 in the fourth quarter.

Analysts and officials have said Ukraine bought more gas than it needed at the end of last year to offset that rise. The price is also lower than the $360 per 1,000 cubic metres Ukraine paid in the first quarter in 2009.

STAGNANT GROWTH

Debt spreads on the EMBI+ index were unchanged, according to Reuters data, but Ukraine's $1 billion global bond due 2016 dropped half a point to 82.25.

No trades had taken place on Ukraine's fledgling PFTS stock market on Monday. On Friday it had risen 0.46 percent to 625 points.

"It is unlikely there will be excessive activity on the stock market as the first round of the presidential election did not bring many surprises, while the decisive second round will not take place before February," analysts at Alfa Bank said.

"This indicates that the market's strong start to the year could become stagnant and those willing to invest in Ukrainian stocks could postpone their decisions for another month."

The tiny stock market has had lurching fortunes in recent years. It was one of the faster rising stock markets in the world in 2007, rising over 130 percent, but then plunged 70 percent the following year as investors fled risky markets.

Last year it grew 94 percent. (Additional reporting and writing by Sabina Zawadzki in Kiev; additional reporting by Carolyn Cohn in London; editing by Stephen Nisbet)

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