Capitalization of Ukrainian agroholdings in 2018

In 2018, capitalization of Ukrainian agroholdings listed on foreign exchanges generally showed a slight gain in the first half of the year and a gradual decrease in its latter half (see the diagram). It was within the range of EUR 2.6-2.7 Bl as of the beginning of 2018 and at EUR 2.3 Bl late in the year, UkrAgroConsult analysts point out. 

The annual peaks were achieved on January 24-30 (a level of EUR 2.93-3.0 Bl) and May 16-22 (a level of EUR 2.82-2.86 Bl).
Overall, last year’s capitalization trend followed the 2017 exponential curve of the market value of agroholdings. At the same time, capitalization of Ukrainian public agroholdings during most of 2018 was roughly EUR 200 Ml below its 2017 level. 
In our opinion, the relatively stable capitalization trend in January - May resulted from quite sustainable development of the agricultural sector, sales of products from the previous year, and favorable crop and export prospects. 
Capitalization has declined since June under the impact of a few factors. Roughly 58% of capitalization of Ukrainian agroholdings was accounted for by the value of those listed on the Warsaw Stock Exchange and other some 40% by the value of agroholdings listed on the London Stock Exchange. Below is presented volatility of a general decline in the Warsaw and London Stock Exchange indices, which reflected global market trends. 
Last year, the UAIndex of agroholdings moved in line with the falling indices of the above-mentioned stock exchanges. Having started the year at 4.56 points, it peaked at 5.3 on January 25 and at 5.06 on May 17, but then dipped to 4.1 points in December. Overall, this reflects the attractiveness of Ukrainian agribusiness to portfolio investors. 
To a certain degree, the capitalization decline was contributed to by the trend of the Polish zloty exchange rate against the euro (see the diagram). The strengthening of the zloty against the euro in 2017 promoted growth of the euro-devaluated capitalization value, but its weakening in 2018 pulled this value down.
The diagram on the right indicates that last year’s exchange rate of the pound sterling against the euro was quite stable and could not noticeably affect the size of the 40-percent share of total capitalization of agroholdings in euro terms.

Pointing out the key role of external factors in shaping the capitalization trend in Ukrainian public agroholdings, it should be noted that internal incentives – bullish prospects for domestic consumption of agricultural products, investment in the renovation of agricultural production facilities, and financial stabilization – turned out to be insufficient.
Last year, the macroeconomic environment, particularly tension in the financial sector, and mounting agricultural logistics problems in Ukraine were not supportive for investment in Ukrainian agroholdings.   
Hopefully, this trend will be reversed, and 2019 will witness an increase in the market value of Ukrainian public agroholdings.  
Detailed information on exports of grains and grain products, supply and demand balances, price trends, crop condition and harvesting/planting progress in Ukraine, and global grain and oilseed market trends is available to subscribers of UkrAgroConsult’s weekly publication “Agri News.”