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. Last Updated: 07/27/2016

RTS Hits 6-Month High on Surging Oil

The country's equity indexes reached new highs Friday, following a rise in oil prices and the news of the World Trade Organization deal with the United States.

The RTS index ended the week at 1707, up 4 percent for the week. Friday's close marked the highest level the dollar-denominated index has seen since May. The ruble-denominated MICEX index closed at 1503, up 3.5 percent for the week.

The RTS initially fell Friday morning amid a drop in oil prices but the index rose rapidly in the afternoon as oil prices rebounded and reports emerged of an agreement "in principle" between the United States and the Kremlin on Russia's entry into the WTO.

Analysts Friday were cautious about reading too much into the reports of a WTO deal, however.

"I think the market in general has become a little bit cynical about 'imminent' WTO membership for Russia," said Roland Nash, head of research at Renaissance Capital. "I don't think that's what's driving the market at the moment."

"I wouldn't read too much into it," said Erik DePoy, a strategist at Alfa Bank. "I think people realize that it's an ongoing process."

Russian oil stocks gained last week along with a rise in crude futures, which were trading Friday at $60.54 on NYMEX, up 2.4 percent over the previous Friday's close at $59.14.

Rosneft (ROSN) shot up 8.1 percent last week to close at $9.33 on speculation that the state oil company would buy oil assets or shares in an oil producer. The company said Friday that it would consider purchasing gas stations in China.

Tatneft (TATN) shares rose 4.3 percent over the week to close at $4.85. The firm said its 2007 tax bill would fall by $250 million -- 20 percent of estimated earnings -- due to new legislation giving oil companies tax breaks for squeezing oil from nearly depleted wells. Some 87 percent of Tatneft's output comes from fields with high depletion rates, according to MDM Bank.

LUKoil (LKOH) closed at $86.40, up 5.8 percent for the week, and Surgutneftegaz (SNGS) closed at $1.37, up 6.1 percent.

Nikolai Saperov, chief analyst at Sovlink, said the RTS could drop next week because energy-related blue chips have been advancing faster than oil prices. "The possibility of a correction is very high, and I think it will happen next week," Saperov said Friday.

Shares of aircraft maker Irkut (IRKT) fell after being given an unexpectedly low valuation in the reorganization of the aerospace industry.

Irkut fell 8.1 percent after the government's plan for the creation of state-owned United Aircraft Corporation valued Irkut at 25 billion rubles ($940 million), well below the 60 billion-ruble ($2.25 billion) valuation given to Irkut's main rival, Sukhoi Holding. Irkut slid 2.53 rubles Friday to 28.69 rubles at the close of trading, valuing the company at 28.1 billion rubles ($1.06 billion).

Meanwhile, shares in two metals-related firms fell after not-so-hot IPOs.

Local shares of Severstal (CHMF) fell 8.7 percent over the week after the company sold $1 billion in global depositary receipts in London. "It had to compete with a lot of other IPOs at the same time," DePoy said. "They didn't place all the stock they wanted to."

Shares of Raspadskaya (RASP), a top coking-coal producer, dropped 4.9 percent after their debut Friday on the RTS. The company, partly owned by steelmaker Evraz, raised $317 million in its IPO.