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The market is trembling: what risks brought Trump’s victory for Ukraine

Author : Oleksandr Moyseyenko

Changing the comfortable outer "shell" can be painful for Ukraine, but it is a necessary step that would force the country to offer new startups and businesses
20:17, 11 November 2016

Read the original text at epravda.com.ua.

The New Yorker

Today, the main theme of the day in Ukraine have become the US presidential elections and Donald Trump’s victory.

The choice of the Americans found some Ukrainian politicians by surprise.

For example, Interior Minister Arsen Avakov deleted from his page in Facebook post in which he called Trump "dangerous and shameless marginal".

Given that the United States are now, perhaps, a key ally of Ukraine, the rate of the new US president will also impact on the situation in Ukraine.

Related: Trump accuses media of inciting protests

Ukrainian politicians did not expected the odious Republican to win, who said nasty things at least about the same "Crimean issue". The rhetoric of the Democrats far more suited Ukrainian authorities.

But judging by the reaction of global financial markets, Trump victory came as a surprise not only for the Ukrainians.

Related: Trump meets Obama at White House

As soon as the election results became known in key states, started a collapse of the dollar and the Mexican peso. In addition, investors began selling stocks, currencies of developing countries, and go into defensive assets - gold, government bonds and the yen. Ukrainian Eurobonds began to lose price.

However, by the evening markets gradually started to win back the situation. The same thing happened in the financial markets after the vote for the British Brexit.

Related: Anti-Trump protests all over the country: at least 65 arrested in NY

We surveyed financial analysts whether Trump's victory can significantly influence the Ukrainian economy.

Vitaly Shapran, member of the Ukrainian Society of Financial Analysts

Europe has reacted fairly well. FTSE down by a few points and then jumped. The only minus was Asia, which closed on a minor note, just as it became clear that Trump wins. I would say that for the markets it was a shock, but not a tragedy.

But emerging market currencies showed growth of just the dollar. I think the arrival of Trump means that the Federal Reserve System will again delay the growth rate, and this is one of the main growth factors for emerging market currencies.

Most likely, the Federal Reserve System will not raise rates, and this will give a head start in emerging markets. On the other hand, strict measures may appear in trade negotiations with China in respect of Mexico and in relations with the EU.

Related: Savchenko urges Trump to strengthen US support in fight against Russia’s aggression

Specifically, with Ukraine it would be difficult. The United States and the Russian Federation have a dispute over Ukraine, and now we do not know exactly how the new US president position himself in this dispute. On the one hand, his campaign promises to soften the relations with Russia. On the other hand, the Republicans and conservatives are terrible apologists "Cold War".

Ukraine, as such, would be out of his interest.

Ivan Uglyanytsa, Financial Analyst

The impact on the Ukrainian economy may be indirect - through the prices of risky assets, exchange rates and so on. Even the western stock indices rather quickly recoup the initial reduction.

Related: Trump's Victory Proves the U.S. Is Unexceptional - Leonid Bershidsky

Mexican peso remains in the red, and some other currencies for which the correction has gone much earlier. Correction of "long" interest rates in anticipation of inflation also began long before the election.

Iron ore generally "flies away into space". Rather, Ukraine will have the effect of other events that may occur (or is already happening in the market), and which are not specifically related to the elections in the United States.

In general, the election itself and recent Brexit are rather a consequence, not a cause. This is a reflection of changes in voter evaluation that occurs at least since the crisis of 2008, and since then has only increased.

The same process of de-globalization, a strong deceleration (stagnation and seems to reduce) the world trade - it all started not with the Trump elections or Brexit. These processes are more than one year, and they affect the whole world, to exporters, to Ukraine as well.

Alexey Kusch, advisor to the president of the Association of Ukrainian Banks

Condition of markets after Trump's victory can be described in one word: confusion / uncertainty.

Related: Who is Donald Trump?

For system players such an outcome has been forecasted. A recent Brexit in terms of the global consequences - is, in fact, the same Trump, only the London fashion. China for several years was preparing for the global rules of the game change, reorienting its economy on domestic consumption model.

Unfortunately for us, the uncertainty has become part of the global system programmed games. Using the theory of entropy of Prihozhin, we can say that from the ensuing chaos will be a new world order.

Related: From threat to cooperation: How Ukraine is going to work with Donald Trump

Ukraine reacted to the events in the United States traditionally: a nervous twitch "black market" currencies and a drop in prices of Ukrainian sovereign Eurobonds on international markets.

Impact of the US elections on our reality can be divided into several "levels". In the near future, if we can avoid the "panic of elites" and / or geopolitical push by Russia, the situation will be relatively stable.

But in the long term consequences will be much more serious. Raising of Federal Reserve System at the end of the year, most likely will not occur, the US economy will be filled with a cheap dollar. But Ukraine, given its lack of readiness to make investments that will not be able to take advantage of, as we do not have profitable startups and new points of economic growth. 

Related: Clinton: We have to listen to Donald Trump and give him the chance to control government

Factor of the commodity markets. Oil will continue to grow above the consensus at the moment the level of $ 50 per barrel. Possible target - 70-80 dollars. But weakness in US consumption, and China will restrain the growth of "our" traditional commodity markets (grain, metal, iron ore raw materials).

We run the risk to be in a unique resource fork: high oil prices, relatively cheap metal, and iron ore. This scissors will cut the profitability and at the same time wind the cost of our export champions.

Related: Trump about Ukraine: best quotes

Factor of macro-financial assistance. The new administration policy will be wearing clearly protectionist and selfish character. So we can expect the US folding programs to guarantee our debts that actual emissions from the Ukraine market of international borrowing.

Most likely, the grant will be reduced, and other types of assistance. Tentative program of cooperation with the IMF. Ukraine will have to rely solely on its own resources, and in terms of administrative deficiency of effective solutions, it will lead to an increase in the risk of default already in the 2017-2018 years.

On the other hand, a change of comfortable outer "shell" can be painful for Ukraine, but necessary step that would force Ukraine to offer new startups.

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