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. Last Updated: 07/27/2016

RTS Hits 300, 44-Month High

Russia's benchmark share index closed Tuesday at heights unseen in the more than three years since the 1998 crisis, with few predicting this year's strong rally will stop soon.

The key RTS index closed up 2.84 percent at 301.45 on turnover of $22.29 million, marking the first time that the index has closed above 300 since it ended at 302.82 on May 8, 1998.

The Reuters Russian Composite gained 3.06 percent to 2,053.18 and the Reuters index of the ruble-based Moscow Interbank Currency Exchange added 3.29 percent to 1,453.66 on trade of 4.22 billion rubles ($140 million).

Alexei Dolgikh of Troika Dialog said investors saw current levels as dangerously high, but said demand was strong enough to carry the market higher.

He said some investors hoped for fresh buying opportunities in the form of a correction and some even wanted to go short.

"They will be punished," he said. "It could come back a little but any hope for a real correction will end in people losing money."

Martin Diggle, a director at Brunswick UBS Warburg, called the breach of the 300 mark a milestone on Russia's road to recovery after the 1998 financial meltdown. He said institutional investors were outweighing attempts to correct.

"Whenever local clients or traders start to pressure it there has been good underlying demand from global funds," he said.

Diggle noted that after last week's focus on second-tier shares, Russia's key blue chips were back in the spotlight.

Top oil producer LUKoil soaked up the bulk of turnover on the RTS as it continued its ascent on indications of corporate governance improvements. It added 4.36 percent to 15.55, taking it to levels not seen since November 2000.

Russia's second-largest oil producer, Yukos, was up 2.16 percent at $6.15, while No. 3 Surgutneftegaz rose 4.46 percent to $0.3510.

In addition to LUKoil and Surgutneftegaz, Dolgikh pointed to strong demand in Gazprom's local shares, which rose 2.82 percent to close at 18.20 rubles.

Gazprom ADRs jumped 6.56 percent to $12.40 with the Reuters index of Russia's foreign listed stocks up 6.97 percent at 198.12 by midday.

While telecoms were stars of the second tier last week, Dolgikh saw machine-building firms and regional utilities in demand now.

The market had gained strength throughout the day.

Sam Barden, a trader at Renaissance Capital, had said in the morning that the market had good support, but that with many market players expecting a downturn, it could change course fast.

"The market is holding at the current levels, but when sellers come it could turn quite quickly," Barden said.