Russia's financial market has stood out as an oasis of positive economic growth for two years in a row, amid a global economic downturn experts fear is heading for full-fledged recession.

Indeed, going by daily news of the high volume of activity on the Russian market – acquisitions, floating shares or posting unprecedented levels of profit – one might get the impression that negative economic trends worldwide, notably, financial upheaval in Argentina, a near-standstill in the Japanese economy and the below-average performances of major Western financial markets, have no bearing on the state of affairs in Russia.

In his address to the Duma last week, Prime Minister Mikhail Kasyanov painted the same rosy picture of the local economy with a 3.3 percent first-quarter GDP growth rate, budget surplus of 2.1 percent, inflation rate of only 6.6 percent against a year-long forecast of 12-14 percent, and gold reserves of $39.4 billion, the highest-ever level since the demise of communism about a decade ago.

The bullish state of the local economy is reflected in the Russian Trading System (RTS) index, which keeps track of the local equities market. It posted one of the world's highest trade volumes last year. Several major domestic companies have gone into international financial markets in search of extra capital needed to sustain growth at home.

For comparison, the RTS index has gone up by about 50.6 percent since the beginning of this year, while the NASDAQ-100, its U.S. counterpart, has fallen by more than 23 percent in the same period, according to various market reports.

Indeed, the RTS index is still on the rise, crossing the 400-point level to peg at 402.91 in mid-May, the second time in the history of the Russian equities market.

"We expect this positive trend to keep up for a while," said Christopher Weafer, head of research at Moscow's Troika Dialog.

The dizzying growth rates are partially due to a recovery from the 1998 financial meltdown, which devalued local equities stocks, some sector experts said. But they say that is not the whole story.

"The Russian market has gained tremendously from high oil prices, and this, along with increasing foreign-investor confidence in the local economy and the likelihood of Russia being integrated into the global economy, have continued to make the Russian market more attractive," Weafer said.

Many feel the burgeoning Russian economy has not yet peaked – a view that was confirmed by President Vladimir Putin's words in the state of the nation address last month, when he reprimanded his ministers for "not being ambitious enough" in their plans for economic development over the next three years. The ministers forecast a growth rate of a mere 3.5-4.6 percent, instead of a growth rate at least twice as high advocated by Putin and his close advisers.

Putin's position is in sharp contrast to the heads of other countries, including those in the Group of Eight, which do not enjoy such growth rates. Many of those countries, having exhausted all means of rejuvenating their economies, are now bracing against the threat of recession.

Putin is not alone in his optimistic outlook: Many independent analysts agree that local companies, especially those in the energy sector, are likely to become more attractive to Western investors.

"We believe that leading global oil companies will eventually have to consider Russian acquisitions in order to increase their reserves, diversify into new regions and achieve economies of scale," Aton brokerage wrote in one of its daily market-research reports in April.

Clearly, companies owned by such local giants as Yukos, Sibneft and Tyumen Oil Company are prime candidates, it added.

But one thing unique about the current bullish market, observers say, is that the high-level activity on the domestic market is not limited to the traditionally active oil and gas sector. It also includes beverage, information-technology, metals and telecommunications sectors.

In the past, Russian companies begged the West for credits on any condition. But this time around, they are using traditionally accepted financial means of raising capital in Western economies, through IPOs or issuing Euro or local bonds, to get the cash needed to consolidate their positions. Otherwise, they face being swallowed up by other local companies in search of investment outlets for their profits.

Wimm-Bill-Dann successfully debuted with an IPO at the New York Stock Exchange in February.

Krasny Oktyabr, a legendary Soviet-era chocolate maker, is also planning to offer a quarter of its shares worth $100 million on the Western markets following its merger with another confectionary company, Rot Front. "The shares, which will be denoted in American Depository Receipts, are to be floated either on the London or New York stocks exchange," said Artyom Kuznetsov, president of Gosinkor Holding, which owns the companies.

Other enterprises that have successfully floated shares at home and abroad, amassing more capital than they imagined possible, include Russian mobile-telecommunications giants Mobile Telesystems and Vimpelcom, as well as an IT services provider and Internet financial-news portal RosBusinessConsulting.

"The results of most local companies that have issued IPOs so far have been more than successful. Besides the oil-dominated equities stocks, others, such as Wimm-Bill-Dann, that are not from the oil and gas sector have also performed very well on their IPO offers," Troika Dialog's Weafer said.

However, to sustain this positive growth trend, two main things need to be done, he said. They include an influx of more foreign investors and more palpable progress on reforms, especially in the banking and tax sectors.

Meanwhile, other companies in need of extra capital to sustain positive growth have resorted to issuing Eurobonds or local bonds. For instance, gas giant Gazprom garnered about $1.9 billion during a road show for its Eurobonds on international financial markets in April, Vitaly Savelyov, Gazprom deputy CEO, told Interfax.

In the metals sector, Russian Aluminum, one of the biggest Russian holdings, is nursing plans to hawk Eurobonds on world markets for the capital it needs to develop new industrial plants. The bonds should be issued within the next few years. Others contemplating the same path include Tyumen Oil, Severstal and several major Russian banks.

At the same time, other large companies, such as national electricity supplier Unified Energy System, are looking for local investment and diversification outlets for their amassed profits.

"We plan to place 3 billion rubles (about $100 million) in three-year bonds on the Moscow Interbank Currency Exchange in mid-June, so as to diversify our credit portfolio," said UES' chief financial officer Dmitry Zhurba.