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U.S. Bank Report: Investors Should Focus On Israel Until Dubai Crisis Fades
December 1, 2009 3:17 p.m. EST
Topics: World, United States, Business
The Media Line Staff
Bank of America Merrill Lynch has advised international investors to temporarily avoid speculation in Dubai and focus on the Israeli stock market.
The report, "Play Defense", earmarks Israel's banks and telecom companies as particularly promising businesses.
"Israel should go back under investors' attention," Haim Israel, Head of Research with Bank of America Merrill Lynch in Israel, told The Media Line. "Especially when we see the chaos in the Gulf."
Dubai is experiencing extreme financial turbulence following Dubai World Group's confirmation of a $26bn debt. The announcement by the government owned company sent the local stock market into a downwards spiral and has shaken investor confidence.
While many investors have shown an appetite for risk over the last couple of months, Haim Israel claims this is now changing.
"Now, especially before the end of the year, people are starting to diversify their risk and going to low beta [low risk] markets," Israel said. "Israel falls exactly under this category."
The report lists five reasons to invest in Israel. 1. "Resilient economic performance vs. Global Emerging Markets as the local recession ended two quarters ago." 2. "Lack of excess positioning as investors remain underweight Israel." 3. "Strong currency vs. the USD." 4. "Substantial domestic liquidity support." 5. "Israel's traditional role as Global Economic Markets beta diversifier."
Analysts are predicting Israel will emerge unscathed by the current crisis in Dubai, where mainly British banks were exposed.
Israel's recent success at having weathered the global financial storm, which emerged in the United States last year, has further raised its financial standing.
"We should give thumbs up and a lot of credit to the economic leadership in Israel," Haim Israel said. "The Bank of Israel and the Ministry of Finance were on top of things. The Bank of Israel was the first [central] bank to decrease [interest] rates, even before the United States, when they understood that we are going into a slowdown."
"Now the Bank of Israel understands that the economic performance is starting to uptake," he added. "Its time to start increasing rates because there is an inflation environment that is starting to build around the world."
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