The financial meltdown has dried up liquidity all over the globe, and Ukrainian investment firms are looking for ways to survive the worst global meltdown in nearly 80 years.

The country’s main stock trading platform, the PFTS, has plunged in recent months, and the short-term outlook is, at best, bleak.

The majority of investment companies were not prepared for the economic shock and found themselves trapped with large, rapidly devaluing portfolios, said Andriy Shklyar, an analyst at Sparta Asset Management.

“Large portfolios of shares purchased during the rapid market growth cannot be sold now and are dragging the revenue performance down,” he said, “Theoretically, bond and money market funds could be an alternative in the current situation. But when the crisis struck, nearly all of the open funds had portfolios made up of between 15 and 60 percent of Ukrainian stocks. That made a protective strategy almost impossible,” Shklyar said.

One of the hardest to be hit will be the overinflated residential real estate market that has for years been highly profitable for both domestic and international investors. The lack of liquidity has made it difficult for developers to unload completed projects. The ongoing impact may make it worse.

“In addition to the credit crunch, the financial crisis influenced the real economy. We see salary decreases and layoffs. As a result, the demand for housing has dropped,” said Vyacheslav Maslenikov, asset management director at Art Capital Investment.

The swift impact of the turmoil came as a shock to many investment firms in Ukraine. For several years, the PFTS mirrored the markets of other emerging markets, the growth was rapid and the fundamentals seemed strong. Those green days have come to an abrupt end, and the market is down more than 70 percent.

Investment experts do not believe all is lost.

Stock prices that have sunk to 2004 levels are now considered a bargain in the long-term. Equity and venture capital firms have an upper hand to make strong investments in cash-strapped companies.

"The crisis is a good opportunity for venture capitalists," said a representative of Aventures, a Ukrainian venture capital firm.

"There are many good companies in the market and the best of them are now in our pipeline," he added.

The gloom has squeezed the finances of many Ukrainian companies who are in crisis-management mode. But in doing so, it creates strong upside opportunities for so-called bottom feeders. It is a good time to invest for firms seeking to capitalize on companies in strain and on a stock market which is destined to rebound. After all, experts say Ukraine’s long-term growth potential is strong.

Tetyana Bega, Investor Relations Manager at Horizon Capital, a private equity firm based in Ukraine, said her company is now in a strong position to invest in niche sectors, having recently raised money for one of its funds. She added, however, that Ukrainian companies could find it difficult to raise investments in these difficult times.

“Unless Ukraine is a priority for a fund, I doubt [new players] would enter the market at this time given the uncertainties throughout the global economy.”

“However, for those with a Ukraine focus, and there are several, Ukraine will continue to be an important place for investments,” Bega said.

“We have just completed fund raising for our Emerging Europe Growth Fund II. So we are in a good position with that fund to make new investments. Thus, we expect this to be a good investment period for EEGF II,” Bega said

According to Bega, Horizon has invested some $210 million to date from its two Ukraine funds. The group, which also invests in Belarus and Moldova, currently manages three funds in Ukraine, totaling over $600 million in capital.

The current investment climate does present opportunities, especially in business spheres that deal directly with basic necessities, such as food.

Experts said strong sectors include agriculture, food processing, medicine and healthcare. No one can guarantee liquidity in other sectors, foremost metallurgy.

The PFTS gave the first indications that the country was entering a steep economic slide. But many experts believe that the nation’s stock market will soon show the first signs of recovery. Until it does, it is best to play it safe. For the near future, investors will concentrate on reliable vehicles such as government bonds, money markets and balanced funds.

When these instruments exhaust their potential, funds will return to the market, Maslenikov said.

There will be victims. Experts said next year will be a period of “natural selection” for the investment community, much like the aftermath of the 1998 financial trauma that affected Russia and Ukraine.

“Those companies that will survive, have an opportunity to return their money and obtain leading positions on the market,” said Yuriy Ushkov of Tiger Asset Management.

Ivan Bachynskiy contributed to this report.