* AIM volumes set for best week in two months
* Ban on AIM stocks in ISA accounts lifted
* Move seen keeping AIM volumes elevated
* Basic resources stocks see big take-up
By Tricia Wright
LONDON, Aug 9 (Reuters) - London's beleaguered junior stockmarket is on track for its best weekly volumes in two months,fuelled by rule changes that prompted investors to snap upstocks, particularly in the beaten-down basic resources sector.
The lurch higher in volumes on AIM, a sub-market of theLondon Stock Exchange, followed implementation on Monday of agovernment plan to let people invest in small firms whileavoiding tax to help drive economic recovery.
The UK's move to allow individual savings accounts (ISAs) -popular products allowing limited tax-free saving - to hold AIMstocks has seen volumes over the past four days rise to some 35percent above the average since the beginning of June.
Despite the seasonal quiet period, trading volumes are up 11percent on the year-to-date average and analysts expect them torise further.
"It went absolutely mental on Monday and it's still prettystrong," Mike McCudden, head of derivatives at InteractiveInvestor, said, adding that on the first day of trading underthe new rules his clients made 300 percent more trades in AIMcompared with the prior four Mondays' average.
"We expect volumes to taper off from initial highs asclients reach their ISA limits and the initial excitementsettles down, however, going forwards we expect steady freshinflows of investment into this market."
Many AIM stocks are small, risky early-stage resourcescompanies, which often need repeated capital injections. Thisweighting saw the AIM index significantly underperform the blue-chip FTSE 100 over the past two years.
Such firms do, however, have the potential for big gains,for example if they find metal or strike oil and with investorappetite for them revived by signs of economic improvement.
The FTSE AIM index has this week risen about 1.8percent, outperforming the blue-chip FTSE 100, around1.5 percent lower.
Ncondezi Coal, Maple Energy and hazardouswaste specialist Augean are among stocks that have seenaverage daily volumes double compared to the past month.
McCudden at Interactive Investor said his clients had boughtheavily into potash explorer Sirius Minerals, seeinggood value in the shares which recently fell sharply on concernsover the outlook for the potash market.
Oil explorer Gulf Keystone Petroleum, which isfocused on oil fields in the Kurdistan region of Iraq, has alsoproved popular, he said.
The pair were among the AIM shares most purchased this weekby clients of Hargreaves Lansdown, whose data runs to Thursday'sclose. Others on the list included Berkeley Mineral Resources and oil and gas group Bowleven.
STRONG INTEREST
Although traders reckon prices will fall back from recentpeaks, they anticipate strong interest in the junior market,particularly in light of a complementary UK decision to abolishstamp duty on shares traded on AIM from next year.
But brokers cautioned that success will often come by way ofvery careful stock selection. Killik & Co suggested focusing oncompanies which offer yield, such as audio visual equipmentrental business Avesco.
And Jim Dolan, head of retail at Beaufort Securities, saidAIM investment would remain risky.
"These are very often young embryonic start-up companiesthat are looking to raise funding to move on to the next stageof their development or companies that have gone through a toughtime, are down on their luck, and are looking to get themselvesgoing again... It's safe to say there is a high risk attached."
