Meitav Investment House held a press conference today at which its chairman and chief investment officer Zvi Stepak gave forecasts for the coming year for both local and global markets.
"Interest rates in Israel are low and so it's possible to look forward to next year in a positive spirit, because stock market prices are not high, and there is certainly no bubble. This is the basis for our estimates for 2011," Stepak said. Among recommended stocks, he mentioned the banks and Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ), the latter because of its high dividend yield.
Stepak sees growth of 4% in the Israeli economy in 2011, and a gradual rise in the interest rate, from today's 2%, to 3% next year.
Commenting on housing prices in Israel, Stepak said, "You have to remember that, in every decade since the 1960s, there were some years in which home prices fell. We are now in a euphoria of rises, but prices do also fall sometimes. The rise from 2007 to 2009 in Israel was a one-time correction of the falls from 1996 to 2005. The rise from 2009 until today is a deviation from the trend, like a spike in a stock price graph.
"I wouldn't describe current prices as a bubble, but home prices are expensive; if they continue rising, there will be a bubble. The measures that the Bank of Israel has been taking are limited in their effect, and what is more important is what the government does. In my opinion, home prices have reached a peak, and from here they will stabilize, and I expect to see falls of 10-15% in the next two to three years. If a global recession develops, Israel will not be an island of stability. It will suffer, and this will affect home prices, and the falls could be sharper."
On investment in stocks overseas, Stepak said, "Our first preference is the US, and to some extent Canada as well. Countries like South Korea, Indonesia, and Malaysia are also attractive. I really do not recommend China, and as far as Japan is concerned, everything depends on what happens to the yen versus the dollar.
"To sum up," Stepak said, "there are years in which, if you give a projection and you are mistaken, the price of the mistake is not high. In today's situation, in which economists around the world disagree about where the world is going, economically speaking, the price of a mistake is liable to be very high. It is therefore important to diversify investments, both geographically, with an emphasis on dividend bearing stocks, and also in type of financial asset, such as by investing in gold."
Published by Globes [online], Israel business news - www.globes-online.com - on December 1, 2010
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