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. Last Updated: 07/27/2016

Yukos Pushes Stock Market Past 500 Barrier

The benchmark RTS index climbed over the 500 threshold on Wednesday for the first time since October 1997, boosted by a rally of Yukos shares.

The Russian Trading System hit a high of 502.11 in midafternoon trading before settling to close up 1.89 percent at 492.82.

Shares in oil giant Yukos jumped 3.16 percent to an all-time high of $14.05 after the company announced it would increase oil exports by 42 percent this year. The bullish market earlier this week pushed Yukos' capitalization to $30 billion, the highest of any Russian company. With Wednesday's gains, its capitalization topped $31 billion.

Traders, who had widely expected the RTS to pass 500 this month, said stocks were being boosted by renewed interest from foreign investors and high oil prices. Flush with petrodollars, Russian corporate investors have little incentive to invest in depressed markets abroad so they are pouring money into the local market, they said.

"We believe it will move higher from this level in the near future, with all likelihood that it will break its all-time high of 569 before this year is over," said Sam Barden, head of international trading and sales at Trust investment bank.

Barden said that apart from liquidity, a main moving force behind the market surge has been a huge demand for Russian assets from Russian industrial groups.

"The Russian market is evolving, and we are in the latter stages of asset consolidation," he said. "Those industrial interests have long-term views, and the assets and companies that they are buying will likely be repackaged and resold back on the market" as initial public offerings.

Alexei Zabotkine, economist at United Financial Group, predicted the RTS would reach 520, cautioning that the third quarter might bring a correction if oil prices fall as expected and squeeze the flow of petrodollars onto the market.

Peter Westin, senior economist at Aton, said that outperforming blue chips aside, the Russian stock market is offering some "interesting stories" for investors, particularly in second-tier stocks.

He noted that the RTS rally is coming on the back of positive news about GDP growth. Economists have been steadily raising their economic growth forecasts in recent months.

"For example, adding 1 percent to the gross domestic product forecast adds 10 percent to the market upside," Westin said.