Dear Investors,
We are pleased to present an overview of the market and the results of OTP Capital’s mutual investment funds for January 2025.
GENERAL ECONOMIC SITUATION IN UKRAINE
In January 2025, the economic situation in Ukraine remained tense due to high inflation rates, which reached 12% year-over-year. In response, the NBU’s monetary committee raised the key interest rate by 1 percentage point to 14.5%. The main inflationary pressures were both short-term—stemming from poor harvests and the devaluation of the hryvnia—and long-term, including labor shortages and increased production costs due to the ongoing war.
Demand for foreign currency remained high during the first half of January, leading to a devaluation of the hryvnia to 42.43 UAH/USD. However, interventions by the NBU and a decline in demand contributed to a strengthening of the hryvnia towards the end of the month. The official exchange rate weakened by 1.5%, from 44.43 UAH/USD to 41.74 UAH/USD, while the cash rate decreased by 2.2%, from 43.011 UAH/USD to 42.06 UAH/USD. The hryvnia’s strengthening in the second half of January had a negative impact on the returns of hryvnia-denominated funds. A moderate and controlled devaluation to levels of 43-44 UAH/USD is expected by the end of the first quarter of 2025.
Despite the rise in the key interest rate, the Ministry of Finance increased the yields on domestic government bonds (OVDP) in the primary market by only 50 basis points.
HRYVNIA DENOMINATED INVESTMENTS
Despite the rise in the key interest rate, the Ministry of Finance increased the yields on OVDP in the primary market by only 50 basis points. As of January 2025, the yields were as follows:
- 6% – OVDP with a maturity of up to 1.5 years
- 6% – OVDP with a maturity of up to 2.5 years
- 3%-14.0% – “reserve” OVDP with a maturity of up to 3.5 years
Interest rates for term deposits in hryvnia increased only in some banks (+50 b.p.), remaining within the range of 8-13%.
The strengthening of the hryvnia in the second half of January had a negative effect on the returns of hryvnia-denominated funds.
FOREIGN CURRENCY INVESTMENTS
Yields on foreign currency OVDP remain stable:
In the primary market:
- 6%-4.7% in USD
- 2% in EUR
In the secondary market:
- Up to 4.2% in USD
- Up to 3.0% in EUR
The market for foreign currency-denominated government bonds (OZDP) experienced significant volatility at the beginning of the year, but following the inauguration of Donald Trump and his calls for an end to hostilities by the Russian Federation, bond prices rose by 0.5%-4%, depending on the maturity period, which positively affected the returns of foreign currency funds.
Results of Funds Managed by OTP Capital
OTP Classic
In the fund’s portfolio, OVDPs worth UAH 1.5 million were sold and new OVDPs with higher yields were purchased for UAH 4 million. Deposits are placed in the following banks:
- UAH 6.5 million – JSC “PUMB”
- UAH 2.5 million – JSC “State Savings Bank of Ukraine”
In the reporting month, the “OTP Classic” fund earned 1.2% for its participants. Over the last 365 days, the fund generated an annual return of 14.6%.
OTP Kids
OVDPs worth UAH 1 million were sold from the fund’s portfolio, and OVDPs with higher yields were purchased for the same amount.
In the reporting month, the “OTP Kids” fund earned 1.4% for its participants. Over the last 365 days, the fund generated an annual return of 18.3%.
OTP Currency
No active transactions were made with the fund’s portfolio.
The growth in the value of OZDPs brought the “OTP Currency” fund a monthly return of 1% and an annual return of 12.1% in USD over the last 365 days.
The return in national currency for January was 0.5% for the month.
OTP Equity Fund
The fund reallocated assets into short-term deposits:
- UAH 1 million – JSC “Ukreximbank”
- UAH 1 million – JSC “Ukrgazbank”
- UAH 1 million – JSC “Piraeus Bank”
- UAH 1 million – JSC “TASCOMBANK”
The demand for shares of JSC “Raiffeisen Bank” led to a price increase of 10.1%.
In January, the “OTP Equity Fund” earned a return of 1.7%. Over the last 365 days, the fund generated an annual return of 21.6%.
Summary
January 2025 was marked by a tightening of monetary policy due to high inflation and fluctuations in the exchange rate. Against the backdrop of macroeconomic instability, hryvnia investments showed modest growth in returns, while currency funds benefitted from the renewed optimism in the OZDP market following political events in the U.S.
