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Merrill Lynch: Israel will avoid emerging markets volatility
The US investment house recommends domestically oriented Israeli stocks and Israeli real estate.
Globes correspondent 16 Oct 06 12:13
Merrill Lynch sees the Israeli economy as a safe haven for investors in emerging markets until the end of 2006. The US investment house expects volatility in emerging markets in this period, volatility which it believes Israel will succeed in avoiding.
"We believe emerging markets will only return to a bullrun trend in 2007. Hence, we recommend being ready to rotate into higher-beta markets at such a time as the cycle looks more promising for emerging-market investing. In this respect, until end-2006, both Teva and Israel Chemicals (MSCI EMF beta of 0.65) should act as emerging-market portfolio diversifiers," Merrill Lynch's report says.

Nevertheless, as an open, export-oriented economy Israel will not be able to escape the effects of slower US growth, Merrill Lynch says. It therefore recommends investing in domestic consumer oriented shares, and in real estate in Israel.

"Those companies that we believe will benefit from stronger consumer trends and looser monetary policy in Israel, as well as their limited exposure to the global economy, include Bezeq (TASE: BZEQ), Partner Communications (Nasdaq: PTNR; TASE: PTNR; LSECCD), and Bank Hapoalim (LSE: BKHD; TASE: POLI)," the Merrill Lynch report says.

"The retail chains should be prime candidates to benefit from a stronger consumer, however we believe their valuations are still too high. Israel Chemicals (TASE: CHIM) is still on our recommended list, with higher potash and bromine volumes expected in the second half of 2006. However, the recent appreciation of the shekel and higher transportation costs are likely to pressure EBITDA margins. We also believe that Ormat Industries' (TASE: ORMT) fundamentals remain intact and with oil prices looking to have stabilised, it would seem that most of the pressure on the company is off.

"We are strong supporters of the fundamentals of Israeli real-estate sector, as we think the macroeconomic environment can only support its growth. Lower interest rates, stronger consumer spending and, most of all, the tight housing supply should boost the sector, especially on the residential side, in our opinion. Though the sector is highly illiquid, we believe investors could do worse than invest in actual bricks and mortar

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Kappa21

Not bad.

But still.... recession is a recession...rather red, white or blue....
It will affect Israel somehow...
if 2007 will be a good year... you cant say 2008 will be a good year too. You gotta look at the variables..

what happens if there is huge price increase in metal or transportation of materials? It might pop the market and make it volatile again...