New regulations may push banks to sell more FX

GLOBAL: Emerging markets credit&FX recorded broad gains yesterday coupled with a rally in US equities ahead of today’s G20 meeting. Ukraine is one of the biggest gainers together with Turkey, Argentina, Mexico and several other names shaken by financial meltdown. The key reason for the rally is G20 leaders’ intention to conduct a major expansion in resources available through the IMF, possibly including a tripling of its war chest to USD750 bn. China seems to be seeking to increase its power by negotiating an enhancement of its 3.66% voting right in return for funds.

Mexico applies for $47 bn loan from the IMF; request was welcomed by Dominique Strauss-Kahn. The loan should be stabilizing one, immediate use of money is not implied.

There have also been overnight talks that the IMF would be allowed to issue SDR denominated bonds which China and other currency reserve rich countries might allocate to official portfolios. SDR 250 bn can be distributed to countries according to their quotas. For Ukraine this would imply approximately $2 bn inflow on top of the IMF loan.

MM&FX: National bank has removed some of the norms regulating open FX position (effective from Apr 23rd). Should NBU continue to change the approach, the next step would be expulsion of off-balance operations and reserves from calculation of open position – it would increase open FX positions of Ukrainian banks beyond allowed and force them to sell FX. USD/UAH stays intact at 8.10/8.30, liquidity is down to UAH 16.9 bn, with that having a minor impact on rates. With numerous CDs maturing next week and expected budget payments banks are not concerned yet about liquidity.

MACRO: Ukrainian Tax Administration said they had beaten the target on tax receipts by 1.6% in Mar and by 3.1% in 1Q2009. Total revenues from taxes in 1Q2009 were $22.2 bn. For the first time this year receipts from VAT lost 8% from plan in Mar. According to mass-media Customhouse performed 100% of plan in 1Q2009, mainly due to gas clearance, while late in Mar State Treasury said customs had received only 53.8% from plan. Thus results of the State budget performance stay behind the curtain. We believe the budget may go in red in April as industries-major taxpayers are ailing.

According to Accounts Chamber, in 2M2009 incomes and expenses of general fund of the budget (not the state budget in all) were 95% and 92.2% from planned volumes. There should be noted budget expenditures nonfulfillment within first months of the year becomes a common practice (eg, till Oct-Nov, 2008, Ukrainian budget had notable surplus, which was offset in Dec).