MICEX Begins To Calculate A Corporate Bond Index (RCBI)

Implementing the program of development of the corporate bond market, the MICEX has begun to publish the index of corporate bonds (Russian Corporate Bond Index - RCBI). This index has been calculated since 1 January 2003. One-year experience has shown that RCBI index accurately reflects the price situation in the Russian market of corporate borrowings. RCBI is weighted by market capitalization. It is the index of bonds traded in the MICEX Stock Market Section. RCBI is a so-called price index, calculated continuously in the real-time mode on the basis of prices of transactions made in the mode of main trading. RCBI is composed of bonds of at least 10 issuers. RCBI's calculation base does not include bonds whose maturity time is less than three months. RCBI's calculation base can be changed no more often than once in a quarter. As of 13 January 2004, RCBI's calculation base consisted of 30 bonds of 27 issuers, including bonds of AVTOVAZ (series 01), ALROSA (the 19th issue), VTB (the 3rd issue), Gazprom (series ?2), MGTS (the 2nd issue and series ?3), RAO UES (series P2), and Tyumen Oil Company (the 4th and the 5th issues).

For professional participants, RCBI-? (Russian Corporate Bond Index-coupon) is also calculated, which is based not only on price change, but also on the change of coupon yield. It is calculated once a day as of the end of the trading session.

The indexes have been developed in correspondence with the recommendations of the European bond commission of the European Federation of financial analysts societies.

The new indexes have been launched to satisfy the need of Russian and foreign investors in a representative indicator of the dynamic sector of corporate bonds, which enables to evaluate the effectiveness of investments in these instruments and make medium- and long-term forecasts of the market development. Besides, the new indexes can be used by Russian regulating organs, foreign observers and independent researchers to monitor the state of the sector of corporate bonds and compare different segments of the stock market.

The methods of calculating the MICEX bond indexes correspond to the existing Russian and international practice of calculating such indexes, while surpassing existing analogues in terms of such parameter as calculating indexes in the real-time mode.

The advantages of the MICEX indexes over bond indexes currently calculated by some market participants and news agencies are:

• the wide sample of securities, which helps to evaluate the development of the market as a whole, rather than one of its parts;
• the weighing of securities, included in the sample, by their market capitalization, which effectively smoothes the effect of non-market factors (jumps in prices of certain securities, caused, for example, by the activities of one single participant) and allows to reveal and forecast macroscopic trends;
• the calculating of indexes in the real-time mode.

The retrospective analysis of the behavior of bond indexes on the MICEX over the period from 1 January 2003 (the index value on that day - 100 units) showed that they properly reflect the situation in the Russian bond market and can become a commercial product. As of 14 January 2004, the value of the Corporate Bond Index was 106,85 points.

Information on the values of corporate bond indexes is posted on the MICEX web site's front page ( www.micex.ru) and at http://www.micex.ru/online/indices/. It will be reflected in the daily results of trading.

The exchange market of corporate bonds was established in 1999. Today, the MICEX is Russia's main trading floor where these instruments are placed and circulate. Almost 150 issuers have attracted over 180 billion rubles (over 6 billion dollars) by distributing bonds. In 2003, over 90 companies entered the exchange market with their securities. The total volume of issue amounted to almost 130 billion rubles.