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Investment in fixed assets rises to 9.6 percentUkraine saw a rise in fixed asset investment during the first half of the year, recording a leap to 9.6 percent growth for the first six months of 2016.

This follows a relatively tepid 0.7 percent growth for the first quarter of 2016, according to government statistics released on Aug. 26 reported by Concorde Capital.

Fixed asset investment fell by 9.2 percent in the first half of 2015, last year’s rating.

This year’s growth occurred across Ukraine’s economic sectors, except for telecommunications which recorded a 65 percent drop. Finance saw a fall of 11 percent, construction of 2 percent, and arts and sports of 28 percent.

According to Alexander Paraschiy, an analyst at Concorde Capital, while the news is encouraging, it is not clear if the growth constitutes a stable pattern.

“It’s not clear how sustainable this two-digit growth might be amid volatility of the current economy,” Paraschiy wrote. “Still, even the results observed till now give the grounds for a potential upward revision of our investment forecast. Initially, we estimated 2.3 percent year over year of investment growth in 2016 but if current tendencies are preserved, we can’t rule out 10 percent expansion this year.”

Ukrnafta hits gusher of regulatory and financial woes

Ukraine’s majority state-owned oil extractor Ukrnafta has been releasing a flurry of panicked press releases over the past week, claiming an ongoing assault from regulators while complaining of ongoing non-payments from its parent company, Naftogaz. Ukrnafta, whose minority shareholder Ihor Kolomoisky exerts de facto control over the company, is trying to dig itself out of debt under the chairmanship of Britain-born Mark Rollins, a longtime oilman who started working at the firm in October 2015.

The largest share of the debt is an Hr 15 billion ($570 million) unpaid tax bill, while there are additional financial disputes between Naftogaz and Kolomoisky.

Rollins has tried to tie the company’s recovery to a debt restructuring plan which, he says, would allow the firm to become solvent within 10 years, permitting board approval. But Ukrnafta now says that Naftogaz is holding the restructuring plan hostage in exchange for Ukrnafta ceasing to attempt to recover natural gas extracted from 2006 to 2012, which it says Naftogaz stole.

Since then, the government has threatened to revoke Ukrnafta’s licenses for 17 of its oil production and extraction facilities across Ukraine. The moves come days before the shareholder meeting at which the restructuring plan is set to go for a vote, timing that Rollins called “remarkable.”

“Licenses suspension won’t help the state to reach its desired goal of having the tax debt repaid,” he added.

PrivatBank ups capital by $100 million

PrivatBank, the country’s largest financial institution, upped its reserve capital by $100 million amid ongoing reports of the bank’s instability, the bank announced on Aug. 26.

The bank said that its total share capital would increase to Hr 23.8 billion ($900 million), a Hr 2.6 billion ($99 million) increase from its previous amount of Hr 21.2 billion ($800 million).

The bank said that it would increase the capital by jacking up the value of its shares by Hr 34.03 a piece, Reuters reported.

The news, which comes after numerous reports that the bank’s credit portfolio is shot through with insider lending and non-performing loans, provoked positive reactions from many analysts.

Dragon Capital said in a research note that the news suggested the bank’s shareholders “maintain constructive relations with the National Bank.” Political analysts and politicians have suggested in the past that the bank is used as a suicide belt by Kolomoisky, with him threatening to default on the bank’s loans, provoking a country-wide financial crisis, in exchange for political concessions.

Though a step towards stability, the move has not totally reassured other analysts.

“Such a capital increase, without additional contributions from PrivatBank shareholders, seems to be a small part of a broad program of the restructuring (recapitalization) of the bank,” wrote Concorde Capital analyst Alexander Paraschiy, “whose potential capital gap ranges from Hr 15 billion to Hr 128 billion, as was hinted by main shareholder Igor Kolomoisky.”

National Bank to liquidate another bank

Ukraine’s state banking regulator has revoked the license of yet another bank – KSG Bank. According to the National Bank press release, KSG systematically violated law and was allegedly involved in money laundering.

According to the National Bank website, the bank suspiciously transferred millions of hryvnia into the accounts of their clients, who then cashed the money. The National Bank discovered that a number of these accounts were opened using lost or stolen passports.

The person who conducted the transactions had 500 credit cards issued in his name, while his passport was registered as stolen.

The regulator says it will alert the police.

The liquidation of the bank will have no impact on the stability of financial markets, given the limited number of customers (around 1,200 clients) and minor amounts of assets, says the National Bank.

Over the past two years, the National Bank declared some 80 banks insolvent, leaving only 100 functioning banks in Ukraine.

 

China to build textile plant in Rivne Oblast

Chinese textile company Yuyue Home Textile Co. plans to build a flax processing facility in Rivne Oblast. The company is investing $20 billion in the construction, which is set to begin in 2016 and will take five years to finish.

The facility will produce flax-based textiles from start to finish, beginning with growing the crop to processing it into cloth. The company will rent about 30,000 hectares of land for the plant and a flax field.

The authorities hope to employ around 1,000 people, with 90 percent of the jobs going to local citizens.

Bank Mikhailovsky depositors receive Hr 1.02 billion

The Deposit Guarantee Fund has paid out nearly Hr 1.02 billion ($38.8 million) to depositors of insolvent Bank Mikhailovsky – 94 percent of the total owed, the Fund said.

The fund’s press service announced it will be halting payments from Aug. 27 to Sept. 2 to add more depositors entitled to compensation to the registry, which will see payouts increase by Hr 88.87 million.

The collapsed Bank Mikhailovsky was owned by Ukrainian businessman Viktor Polishchuk, who set up a fraudulent deposit scheme that offered high growth rates and attracted more than Hr 1 billion in deposits.

The money was not insured by the Deposit Guarantee Fund but after a series of protests from the bank’s former clients in June, the fund decided to compensate depositors.

It started making payments from July 15 following weeks of protest from defrauded clients.