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. Last Updated: 07/27/2016

Jet Crash Reverses Year High for RTS

World markets tumbled Monday after a passenger jet crashed in New York, sending airline and insurance stocks down by as much as 12 percent and backing Russia's benchmark index off its highest level of the year.

The key RTS index hit at a 2001 high of 233.3 in intra-day trading before falling nearly 4 percent on news of the crash, just one hour before the markets closed in Moscow. The RTS closed at 223.97, half a percent off Friday's close.

Traders doubted, however, that fresh fears of terrorist attacks gripping Western markets would lead to massive sell-offs of Russian corporate paper, as market fundamentals remained strong.

"I didn't see any panics and huge sell-offs after Sept. 11, and I don't exclude the possibility that the market may open on higher levels tomorrow," said Alexei Dolgikh, a trader with Troika Dialog.

"Assuming that you don't have any more disastrous events like this, then Russia will continue racing," said Roland Nash, chief economist with Renaissance Capital.

The RTS has gained 59.5 percent since Jan. 1, making it the second-best performing stock index in the world this year, beaten only by China's Shanghai B, which is up 61.48 percent in dollar terms.

However, it is still less than half of its historical high of 570, reached Oct. 3, 1997. In terms of capitalization, the value of all Russian stocks traded over the counter is now some $73 billion -- $11 billion of which is accounted for by Gazprom -- but is still far below the $110 billion figure before the 1998 financial crisis.

"What we've seen in the last month is a new set of investors coming to Russia who haven't looked at Russia in the last three years. It changes the market perception and the way people think about Russia, which will drive the market higher," Nash said.

"The Russian market is currently undervalued compared with better-than-ever macroeconomic performance," said an analyst with a large Western investment fund.

Some analysts said a fail value of the RTS now is about 350 points, if the risk-premium associated with Russian eurobonds is taken into account. "Obviously, we won't hit 350 any time soon, but what is also important to remember, if we compare the markets, is the profitability of the companies," Nash said. "[Profitability] is much higher now than it was in 1997, so there are more fundamental reasons for the Russian market to grow, and companies are different too."

United Financial Group investment bank recently upgraded its RTS forecast for the last quarter of the year from 170-215 to 200-240. And Renaissance Capital predicts the RTS will reach 250 by year's end.