Russia's stock market is celebrating a record closing high - just five years after a rouble crisis brought the country's economy to its knees.

The country's main RTS index has gained more than 1,300% in the past five years and this week topped the previous high of 571.66 points recorded in 1997.

The landmark was hailed by analysts in Moscow as a psychological break with the 'old Russia'.

But some economists also warned about an over-reliance on energy stocks and Western investment.

'Highest in the world'

Russian Prime Minister Mikhail Kasyanov claimed the country now had the fastest growing financial markets in the world.

Speaking on Russian television, he said: "The Russian market - stocks, bonds and other securities - has reached a new record high in terms of capitalization.

"We have always said 1997 was a record year in this respect, with capitalization of the Russian market reaching just over $150bn - but today it exceeds $200bn.

"And the rate of development, the rate of growth in the market, is the highest in the world."

'Right of passage'

The RTS index closed on Wednesday at 573.85 points - higher than the previous record of 571.66 points registered on 6 October 1997.

And it continued to rise on Thursday to close at 588.44 points.

The Russian market's low point was recorded exactly five years ago on 2 October, 1998 when it ended the day at 38.81 on almost non-existent trading volume.

The RTS has gained an astronomical 1,379% since then, and is up 49.9% on the year.

"The RTS completed its 'rite of passage' from the old Russia to the new with a record high closing level," Alfa Bank said in a research note.

"Establishing a new high in this modern market era was always seen as something of a psychological barrier to finally leave the past behind.

"That has now been done, and finally, as a reference point, 1997 is now dead and buried," the bank said.

Foreign investors

Mr Kasyanov said the rise was down to social reforms achieved over the past four years that raised real incomes and propelled investments.

And he urged his cabinet to concentrate on measures that "could keep this momentum moving forward".

But traders said the latest Russian surge had largely been fuelled by foreign investors.

And they warned similar levels of foreign investment existed before the market imploded in late 1997, after catching the so-called "Asian flu" that wreaked havoc across emerging economies.

Foreign investors fled Russia in August 1998 after the government defaulted on its bond obligations and effectively devalued the rouble.

Stand-off

The Russian market went on to lose 90% of its value, while the rouble fell 80% in six months.

Roland Nash of Renaissance Capital said: "For those who remember how depressed the market once was, it is a fascinating lesson of the ability of the market to look forward and forget the past."

The latest market surge comes despite an ongoing stand-off between the Kremlin and Russia's biggest energy company Yukos, over the controversial early 1990s privatization of state assets.

The arrest of leading business people over the summer prompted speculation that the state might reverse privatization.

'Stronger foundations'

But Russian President Vladimir Putin - after initially staying out of the conflict - dismissed the speculation prompting the current surge in the markets.

"Today, buying Russia is a much less lonely experience," James Fekner of the Troika Dialogue bank told AFP newswire.

"The country's political and economic foundations are stronger, integration with the world economy closer, prospects higher," he added.

But analysts have warned Russia's markets are over-dependent on the volatile energy sector, with up to 75% of capital tied up in oil and natural gas.