Barclays Capital analysts Joseph Wolf and David Kaplan find general consensus among US investors that last week's election results will have limited impact on the Israeli market.
The analysts noted, "Both Kadima and Likud (the two highest vote getters) are viewed as pro-business. More importantly, economic policy and stimulus is solidly in the hands of the Bank of Israel and governor Stanley Fischer, and is viewed as apolitical."
After several meetings with US investors, the investment bank said that a surprising number of investors were "overweight" on Israel and the analysts offered reasons to justify the continuing confidence in the country's economy.
The analysts said, "Israel, despite the recent elections and conflict in Gaza (which is not as yet resolved, remains a defensive market, and has been a relatively safe harbor during the current global economic crisis. Relative to other emerging markets, we believe that Israel has lower perceived political risk (despite the current uncertainty, there is no risk of change to the open Democratic system) and less direct exposure to the volatility of commodity markets (given the dearth of natural resources)."
Regarding Israel's potential move from MSCI emerging market status to developed status, the investment bank believes that technical issues would make this challenging for Israel to achieve and concludes, "These issues lead us towards our view that there is a greater than 60% likelihood that Israel will remain in the emerging market index for now."
On individual shares the investment bank were positive on Israel Chemicals Ltd. (TASE: ICL) and Makhteshim Agan Industries Ltd. (TASE: MAIN). The analysts were neutral on telecoms and negative on the banks with the exception of Mizrahi Tefahot Bank (TASE:MZTF), which they described as an increasingly attractive stock because of "the stable and unchanged conservative lending practices in the Israel mortgage market." .
Published by Globes [online], Israel business news - www.globes-online.com - on February 17, 2009
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