In relation to many developing markets of Russia”s market now looks cheap enough

Perspective: believe that the immediate goal (in January), the growth of the MICEX Index is around 1540 on, support - at 1454 n.

Despite the low turnover and limited external liquidity on the occasion of the day off in the U.S., Russia”s stock market showed a clear mood for continued growth. Frankly, it was hard to expect otherwise, given the preceding nearly 3-month consolidation of the market (October /December). Leaving such a long consolidation involves a substantial change of market price levels (see below). Dynamics of trade position (indicator OBV-Comp) on the MICEX index clearly points to the entrance to the new money with an eye on the medium (~ 3 months.) And long (~ 9 mo.) Perspective.

This process of reassessment may require a sufficiently long time interval, which we estimate at about 1.5-2 months, depending on the forces of change, ie, probably before the end of February /early March with a possible intermediate correction ( mid-February). On the market there is money and there is an understanding that if the economic recovery today”s share price may increase substantially. By some estimates the growth of industrial production in December 2009 could significantly increase (by 6-8% higher than in December 2008). Apparently, Russia”s economy was in late 2009, the bottom of the next investment cycle (average cycle length of ~ 3.5 years). This clearly tells the dynamics of growth of investment in fixed capital Russian enterprises (Figure 1).

Next. From the standpoint of market cycles, the end of last year /beginning of the current situation coincides with the characteristic rhythmic point, reflecting the critical moment of market instability (Fig. 2). Earlier manifestations of this rhythm: 19/03/96 (the presidential rally in 1996), 4/11/00 (the beginning of the fall of the markets against the backdrop of the Argentine crisis), 17/05/05 (the beginning ofthe commodity rally). The periodicity of this cycle is approximately 239 weeks. Curiously, the “launch” of this series took place in the time of the August coup of 91.

In relation to many developing markets of Russia”s market now looks cheap enough, which is largely due to the effects of a collapse in 2008. Recovery growth in 2009 has allowed a few to reduce our backlog of other developing markets. However, we still remain in the group of outsiders, especially noticeable in relation to the markets of BRIC. But this is what makes today”s purchase of Russian securities attractive in terms of a more distant perspective.

immediate objective (in January), the growth of the MICEX Index is around 1540 on, support - at 1454 n. (IAD-5).

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