(Rewrites throughout with comments and currency details)
By Ross Kerber
May 22 (Reuters) - The leaders of Ukraine are taking advantage of the country's political crisis by enacting long-term economic reforms, the manager of Templeton Global Bond Fund, a leading investor there, said on Thursday.
Michael Hasenstab, whose $70 billion fund held 5 percent of its assets in Ukraine infrastructure and government securities as of March 31, cited changes in the civil service and energy sectors at an investor conference run by fund parent Franklin Resources Inc.
"Three to five years from now the crisis is actually going to have improved the credit" of Ukraine because of the reforms, Hasenstab told the conference in New York that was webcast by Franklin Resources.
Ukraine's months-long territorial standoff with Russia has shaken markets and tensions are high ahead of the presidential election set for Sunday.
Ukraine bonds have rallied this month. The price of Ukraine's 2023 bonds has risen to 91 cents on the dollar on Thursday from 81 cents on May 2, according to Reuters data. The yield on those bonds has fallen to 9 percent from 11 percent over the same period. Bond prices move inversely to yields.
Global Bond Fund's year-to-date 2.16 percent return lags 87 percent of peers, according to Morningstar Inc data. The fund's benchmark has risen 3.46 percent so far this year.
Although Hasenstab is known as a contrarian manager, his views do much to set the mood of western investors toward Ukraine. Hasenstab said a positive move came with the adjustment of Ukraine's pegged exchange rate, which was costing the country's central bank too much to prop up.
"The crisis actually solved that, it blew apart the peg," Hasenstab said. And unlike Italy or Spain, Ukraine did not carry worrisome amounts of debt, he said.
Hasenstab also said Ukraine's leaders have used the crisis well as a bargaining chip in pursuing internal reforms. He said the likely winner of the election would move to appease Russian President Vladimir Putin, however, such as giving more autonomy to eastern regions and keeping Ukraine out of NATO.
Hasenstab called those steps "the political recipe" to keep Ukraine stable as a buffer rather than to be caught up in a tug-of-war between East and West.
"In some cases a crisis actually can engineer some positive things," Hasenstab said.
Shares in Franklin Resources were up 0.4 percent in midday trading to $55.04. (Reporting by Ross Kerber in Boston; Editing by Grant McCool)