The key indicator of the Ukrainian stock market, the Ukrainian Exchange index, in the outgoing year lost about 34%, the average daily turnover on the market declined by almost three times. In addition, if a year ago correlation with the global markets was recorded at 0.9, then this year correlation coefficients downgraded to "minus" 0.3.

MARKET WITHDRAWAL

According to the director general of Concorde Capital investment company, the chairman of the exchange council of the Ukrainian Exchange, Ihor Mazepa, the year of 2012 was crucial for the stock market of Ukraine, and the investment banking business model, which previously allowed "to live and work," underwent a number of significant changes: trading is undergoing hard times, there had not been M&A deals, IPO and SPO transactions.

In addition, with regard to legislative initiatives, the stock market this year has lost in all directions, the key of which was the adoption of the law on the depository system.

The head of the analytical department at Art Capital investment company, Ihor Putilin, in turn, noted that the specifics of the outgoing year were the movement of Ukrainian stock indices in the "outset" for most of the time, depriving investors of the possibility of earning money. This forces many professional participants to terminate their activities or seek other instruments on other markets.

In this regard, Director General of SP Advisors investment company Nick Piazza forecast several M&A transactions in the exchange sector next year.

"Some owners of small online traders, brokers and AMCs want to get out of unprofitable businesses, while their customer base and a low cost of companies can attract larger participants, primarily from Russia," said the expert.

Deputy Head of the Investment Business Department at Eurogasbank Artem Bilonoh, in turn, pointed out that the decline of the Ukrainian stock market in 2012 follows only that of the Cypriot market, despite the fact that it is difficult to compare the current economic situation in the countries.

"If we consider only fundamental macroeconomic factors, the current discount of the Ukrainian stock market against border and emerging markets reflects the most pessimistic scenario of the possible," said the expert.

However, the head of the trade department of Altana Capital investment company, Andriy Tarasenko, noted that the decrease in the Ukrainian Exchange index for the second year in a row would restrain it from a possible drawdown next year.

HE THAT HESITATES IS LOST BUT NOT NEXT YEAR

According to Mazepa, capital and debt markets, as well as the NDF market (Non-Deliverable Forward Contracts) will be "working" in 2013. The M&A market is expected to revive, while IPO markets will be closed by the third quarter of 2013.

In addition, the exchange council chairman announced intention in 2013 to continue discussions with regulators regarding new instruments for the Ukrainian Exchange, such as gold futures, currency pair futures, and dual listing.

However, according to Managing Partner of Capital Times investment company Erik Nayman, the NBU currently opposes any innovations, therefore it's not worth expecting new instruments next year.

Nayman drew attention to the significant budget deficit, which will maintain high demand for hryvnia resources from the side of the state. If to add the process of deleveraging Ukrainian banks, which is expected to continue for another three years, these factors will keep a high cost of money even under the terms of low inflation, he added.

"Therefore the year of 2013 is unlikely to disappoint depositors and investors in fixed-income instruments, except for cases of the wrong selection of banks and issuers," said the expert.

Bilonoh forecast that the sector of debt instruments, namely corporate securities, next year would develop.

"The importance of investment distribution among different asset classes, extra yield, the forecast of the economic growth acceleration on emerging markets and a favorable outlook regarding defaults – all this will increase the investment attractiveness of corporate bonds to clients," he said.

According to Piazza, Ukrainian companies should use the next 24 months to streamline and withdraw own businesses from the shadow.

"This is the basics you are to start with if you want to establish good relations with investors, international banks and other financial institutions, because publicity and a good international reputation may partly save from financial and political instability in Ukraine, as well as hostile takeovers," he said.