Following in Russia's footsteps?
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Following in Russia's footsteps?

Ukraine has been pushed to the brink by Russia's financial turmoil and the government's resistance to reform. The treasury bill market needs restructuring or there will be default, equity trading has ground to a standstill, and foreign investors are counting the days until they can get their money out of the country. Theodore Kim reports.

So much untapped potential

If the local currency T-bill market is a good indicator of a country's financial health, Ukraine is seriously unwell. Known locally as OVDPs (in Russian OVGZs) they are hryvna-denominated zero-coupon notes that are held by the National Bank of Ukraine (NBU) in a dematerialized form. Maturities on all notes are 12 months or less. Total capitalization in the T-bill market was about $5 billion at the start of this year and even after the Asian crisis last year, Ukrainian T-bills were seen by foreign investors as an attractive play. They still own around $580 million worth.

The major buyers included off-shore hedge funds and such investment banks as Merrill Lynch, Warburg Dillon Read, ING Barings and Credit Suisse First Boston. Last year, before the Asian crisis, yields fell to as low as 18%. New T-bill issues were easily oversubscribed and an increasing number of foreign fund managers visited Kiev to find out what OVGZs had to offer. One attraction was that none of the foreign ownership restrictions that have complicated the GKO market apply to OVGZs. Another was that there are few other ways to gain exposure to Ukrainian credit risk.

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