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Micex to Advance Most Since 2009 After ‘False Breakdown’

Micex to Gain Most Since 2009 After Breakdown
A financial index curve is displayed on an electronic board at the RTS Stock Exchange in Moscow, Russia. Photographer: Alexander Zemlianichenko Jr/Bloomberg

Russia’s Micex Index will have its biggest annual gain since 2009, adding another 16 percent by the end of December, according to technical analysis by Auerbach Grayson & Co.

The nation’s benchmark stock gauge slid 4.5 percent to 1,494.86 in the three day to March 29, trading below its 200-day moving average of 1,513 for the first time since Jan. 25. This so-called false breakdown was a sign that the Micex would enter a rallying phase, according to Richard Ross, a technical analyst at Auerbach Grayson in New York.

“Those false breakdowns can lead to fast moves in the opposite direction,” Ross said by phone last week. “A false breakdown, below the 200-day average, is the market’s way of shaking you out of a big advance, that could be exactly what we’re setting ourselves up for.”

The 30-stock measure may end the year as high as 1,730, Ross said. That would represent an advance of 23.4 percent, the biggest annual gain since 2009, when the Micex surged 121 percent, data compiled by Bloomberg show. The measure slid 1.8 percent to 1,497.19 in Moscow on April 6.

The Micex’s 6.3 percent slump in the last two weeks of the first quarter, its first two-week decline this year, was a “pullback” in the index that created a “very compelling buying opportunity,” according to Ross.

“Buyers are still out there looking for opportunities to get into the Micex, not to get out of the Micex,” he said.

The gauge trades for 5.8 times analysts’ earnings estimates for member companies, the cheapest of 21 emerging markets tracked by Bloomberg. That compares with 11 times for Brazil’s Bovespa Index and the Shanghai Composite Index’s 9.7 valuation multiple, data compiled by Bloomberg show.

Futures expiring in June on Russia’s dollar-denominated RTS Index gained 0.5 percent to 156,550 in U.S. trading at the end of last week. Trading of American depositary receipts and U.S.- listed stocks in New York was closed for a holiday on April 6, while Russian markets were open.

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