Investment at the very edge

The Ukraine is the new frontier for opportunity-seeking investors. Despite a history of nuclear grief, the country holds promise.

Investment managers in emerging markets are a bit like tourists. When one new location begins to look played out or crowded they simply move on in search of the next lush unspoiled territory. For tourists the next prospect is Lombok, for fund managers it is the Ukraine.

The Ukraine? Yes, the Ukraine. Its very name means at the edge, and it is certainly at the very edge of the investment universe, beyond Poland, the Czech Republic and even Russia. Not so long ago it was experiencing a rate of inflation which made Russia look stable, and at 177,000 to the dollar last week the Ukrainian coupon or karbovanets was worth less than one-thirtieth of a rouble.

Ukraine was also in dispute with Russia over ownership of the Crimea and the Russian Black Sea fleet, and its main claims to world fame were the Chernobyl nuclear reactor, which blew up a decade ago, and its equally dangerous status as a nuclear power by virtue of the ageing former Soviet missiles on its soil.

Some of these problems are fading away but none of them has disappeared, and there are plenty of other issues to worry would-be investors. A quarter of the population are Russians, economic reform has made even less progress than in Russia, and President Kuchma and his cabinet are still at loggerheads with the parliament. But at least the Ukrainian president looks fit enough to last out his term and push through long-delayed reforms to benefit the long-neglected economy.

A new currency is being introduced this week, by knocking five noughts off the existing unit and calling it a hryvna. Tougher monetary policies have been introduced at the behest of the IMF and inflation could be down to just 28 per cent next year.

The Ukraine has no oil or gas and relies heavily on nuclear and coal- fired power, but potentially it is richer than Russia. It produces 10 per cent of the world's steel, it is big in chemicals. and with proper management it could regain its 19th-century status as the breadbasket of Europe. It also has a large pool of cheap but well educated labour. It has attracted only a tenth of the inward investment won by Poland, but the total could treble next year.

So far there are just four companies listed on the Kiev stock market and another 100 companies are traded on an over-the-counter market, but a big step towards privatisation is due before the end of the year, with 208 more companies lined up. The main sectors are energy production and distribution, steel, telecommunications, food processing and consumer goods. The current market capitalisation is barely $1bn and current prices average just one times earnings. Quoted companies include the Lisichansknefteorgsyntez oil refinery, the Niznnyodniprovsky tube rolling plant and ZAZ, the maker of the Zaporozhets, one of the less successful cars of the Soviet era.

Tough decisions will still be needed to close down industries with no competitive future. But if independent registrars can sort out the ownership of assets and establish a proper clearing system, the Ukraine could follow the trail blazed by Thailand, the Philippines, India, Poland and Russia itself. There is also a substantial bond market. Regent Pacific Group, based in Hong Kong, intends to raise $50m this autumn and inject $5m of its own money to launch the first commercial investment fund specialising in the country. But the minimum investment is likely to be $100,000, so smaller investors will have to find a private client broker willing to syndicate an investment.

Arts & Entertainment
Madonna in her music video for 'Like A Virgin'
music... and other misheard song lyrics
Sport
Steven Gerrard had to be talked into adopting a deeper role by his manager, Brendan Rodgers
sportThe city’s fight for justice after Hillsborough is embodied in Steven Gerrard, who's poised to lead his club to a remarkable triumph
News
Much of the colleges’ land is off-limits to locals in Cambridge, with tight security
educationAnd has the Cambridge I knew turned its back on me?
News
Waitrose will be bringing in more manned tills
newsOverheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
VIDEO
Have you tried new the Independent Digital Edition iPad app?
News
The energy drink MosKa was banned for containing a heavy dose of the popular erectile dysfunction Levitra
news
Environment
People are buying increasing numbers of plants such as lavender to aid the insects
environmentGardeners rally round the endangered bumblebee
Sport
Australia's Dylan Tombides competes for the ball with Adal Matar of Kuwait during the AFC U-22 Championship Group C match in January
sportDylan Tombides was diagnosed with testicular cancer in 2011
Arts & Entertainment
Customers browse through Vinyl Junkies record shop in Berwick Street, Soho, London
musicBest exclusives coming to an independent record shop near you this Record Store Day
News
Ida Beate Loken has been living at the foot of a mountain since May
newsNorwegian gives up home comforts for a cave
Extras
indybest10 best gardening gloves
Arts & Entertainment
tvIt might all be getting a bit much, but this is still the some of the finest TV ever made, says Grace Dent
Arts & Entertainment
Comedian Lenny Henry is calling for more regulation to support ethnic actors on TV
tvActor and comedian leads campaign against 'lack of diversity' in British television
News
Posted at the end of March, this tweeted photo was a week off the end of their Broadway shows
people
News
peopleStar to remain in hospital for up to 27 days to get over allergic reaction
Arts & Entertainment
The Honesty Policy is a group of anonymous Muslims who believe that the community needs a space to express itself without shame or judgement
music
News
Who makes you happy?
happy listSend your nominations now for the Independent on Sunday Happy List
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Helpdesk Engineer Apprentice

    £150.00 per week: QA Apprenticeships: This company has been providing on site ...

    Telesales & Sales Support Apprentice

    £221.25 per week: QA Apprenticeships: This company is a well established Inter...

    Client Relationship Manager - SQL, Python

    £40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

    **Financial Services Tax**

    £35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Jury still out on Manchester City boss Manuel Pellegrini

    Jury still out on Pellegrini

    Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
    Ben Stokes: 'Punching lockers isn't way forward'

    Ben Stokes: 'Punching lockers isn't way forward'

    The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
    Mark Johnston: First £1 million jackpot spurs him on

    Mark Johnston: First £1 million jackpot spurs him on

    The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit