Ben Aris in Kyiv -

On balance, the Ukrainian investment story following the presidential elections in February has improved. After five years of political instability and endless populism from revolving-door government (five general elections in five years), President Viktor Yanukovych has at least brought a measure of constancy, as he now controls both the presidency and parliament.

The administration has also bitten the bullet on the hugely unpopular reform to gas prices, which saw domestic tariffs increased by 50% this summer. This cleared the way for a new $15bn stand-by deal from the International Monetary Fund (IMF) and the government followed through with a $2bn Eurobond issue in September - all of which has removed the threat of a fiscal crisis and bought the state some time to prepare the ground for far-reaching and long-overdue reforms to the economy.

The trouble is that few seem especially impressed by all these changes. "It is like watching someone on life support dying," says one banker in Kyiv. "There was huge volatility at the start of the year, but the blips are getting smaller and smaller - the market is going to flatline soon."

In parallel to the relatively good economic news, there is a second storyline of regression to the days before the Orange Revolution in 2004-05, which could undermine Ukraine's hard won democratic credentials. Yanukovych has been monkeying about with the election laws to boost his hold on parliament, press freedoms are being curtailed and the Constitutional Court on October 1 cancelled reforms passed in the aftermath of the Orange Revolution, thereby returning important powers to President Viktor Yanukovych.

The upshot is that those trying to raise capital say they have little to offer to investors; the counter argument to any upbeat sales pitch is: "Yanukovych had to make the reforms just because he needed the IMF money and the politics is sliding back to where it was in 2004."

Ukraine, it seems, is stuck in the same place it was when the Orange Revolution happened. "The last five years have been wasted," argues Hartman Jacob, CEO and founder of Delphi Capital in Kyiv. "There has been no real move forward. The oligarchs have no incentive to invest for the long term and spend their time grabbing assets like children in the playground fighting over sweets. Now Yanukovych is rebuilding the old system and there is no real investment case here."

That could change. Deputy Prime Minister Sergei Tigipko has made a lot of noises about following Georgia's model of liberalisation, but most investors are waiting to see if those promises come true.

Moscow mule

In the meantime, Ukraine's future remains tied to the fate of Russia; if Russia booms and starts to attract money again (as many of the Moscow-based analysts believe will happen next year), then these inflows should spill over into Ukraine. "Apart from a few months around the Orange Revolution, the correlation between the Ukrainian stock market's performance and that of Russia's has been 95% for most of the last five years," says Aliona Osmolovska, head of investors relations at Dragon Capital.

The one place where there has been progress is that over the last year or so more and more Ukrainians have started to invest directly into stocks through e-trading platforms. On the main market, about half of the daily turnover (around $7m) is comes from retail investors.

With little else to do, the stock market regulator has been improving the financial infrastructure. Russia's RTS exchange bought into Ukraine and in two months the bulk of the trading shifted from the main exchange, the PFTS, to the new Ukrainian Exchange (known as UX to the locals). All the retail day traders are now on the UX and its owners are working hard to extend its reach; for instance, futures trading was introduced and a dual listing for Ukrainian companies already traded in Frankfurt was also launched in September.

But these reforms are of little comfort while most investors wait to see what the government does next. Yanukovych will have to act decisively if he is going to break his country's dependency on Russia.