Market is moderately sensitive towards problems
By Alexander Bordovsky
Surprisingly, the current difficulties in the national economy aren’t a reason for panic on international stock markets. Investors haven’t reacted towards the devaluation of the national currency in Belarus, or the feverish demand of the population for consumer goods, or other economic vicissitudes. Belarusian bonds are not being hastily dumped; rather, quotations for the two issues of Belarusian Eurobonds have risen. Soon, financial analysts expect to see the price of Belarusian Eurobonds rise by 3-4 basis points.
Belarus first entered the Eurobond market around a year ago, with volumes of Belarusian loans on this market since growing like weeds. The first Eurobonds were placed by Belarus on European financial markets in July 2010. The debut issue, boasting a 8.75 percent interest rate and loan redemption in 2015, was restricted to $600m. Another $400m was placed in August 2010. Last December, not only European, but Russian investors acquired the opportunity to grant loans to the Belarusian economy. Our country placed two-year state bonds, worth 7bn Russian Roubles, on the Russian financial market.
Many are now afraid that the bonds issued by Belarus might lose their attractiveness, because of difficulties on the currency market. Meanwhile, according to Bloomberg Company data, Belarusian Eurobonds are being traded at 11.6-11.8 percent profitability per annum. Over all, financial analysts are favourable in their forecasts. “Belarus’ first actual devaluation of the national currency, by 8 percent in late March, led to a significant growth of Eurobonds in Russian Roubles. On general, Belarusian decisions were perceived positively by investors,” notes Pavel Vasiliadi, Director of the Analysis and Risk Management Department of UFS Investment Group. He adds that, in late March, Belarus’ sovereign Eurobonds, nominated in US Dollars, demonstrated a small growth after devaluation.
During the second turn of the devaluation, the national currency has lost more than half of its value. After this news, sovereign bonds in US Dollars dropped by 3 ‘figures’. However, this may have been connected with a general negative mood on the market rather than the economic situation in Belarus. The situation on the world market stabilised the next day and quotations of Belarusian bonds returned to their previous level,” explains Mr. Vasiliadi. The first issue of Eurobonds has risen by 1.4 percent while the second (with debt redemption in 2018) has grown by 1.6 percent.
What should we expect from Belarusian Eurobonds? Analysts say that, from June-July, their price will increase by 3-4 percent. “We believe that the profitability of Belarusian bonds today is exaggerated,” asserts the UFS Investment Group. The current quotations don’t take into account the receiving of $800m and, later, of $400m from the EurAsEC Anti-Crisis Fund (by the end of the year). In addition, a stabilisation loan from the IMF has been applied for by the National Bank and the Belarusian Government. According to specialists, a fair level of profitability for Belarusian Eurobonds is within 8.5-9 percent, although this now stands at 11.75 percent.
According to Cbonds data, in late May, the profitability of Hungarian Eurobonds (redeemed in 2020) amounted to 5.42 percent, while those of Russia (redeemed in 2030) stood at 4.56 percent. Ukrainian bonds (redeemed in 2013) stood at 4.46 percent, while those of Poland (redeemed in 2019) reached 4.34 percent and those of Malaysia (redeemed in 2015) had just 2.34 percent profitability.
The current economic situation in the country has made the Belarusian Government reject its plans to place securities on foreign markets, at least, this year. Private emitters are also refusing to issue Eurobonds. Belarusbank has shifted its emission indefinitely, although was recently considering an opportunity to take $500m.