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midastouch017

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midastouch017

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Tuesday, 04/05/2005 9:14:30 AM

Tuesday, April 05, 2005 9:14:30 AM

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Merrill Lynch Israel: Israeli companies are being spared the rush to treasuries
05.4.2005 / 14:32
Nitzan Cohen

Major foreign investors have been trekking back home to safe harbor on Wall Street, but Israel is exempt to a degree from the trend rocking emerging markets around the world, declares Merrill Lynch Israel manager Yoram Inbar.

In a special interview with TheMarker Sunday night, Inbar explained that the rising interest rates in the States render U.S. government bonds more attractive, and higher-risk investments overseas commensurately less so. Billions are leaving emerging markets and returning home, but the effect on Israel has been minor because of the country's special qualities, says Inbar.

In the eyes of the international investment community, Israel belongs to that category of emerging markets, which are losing their allure compared with the benchmark o f the 10-year treasury bond. With it yielding 4.6% in dollar terms, anything less would be considered a loss.

But Israeli companies have special status, Inbar explains, mainly because of their technological prowess and their adeptness at adapting quickly to morphing market conditions.

"Obviously, emerging markets will hurt as interest rates rise in the U.S., and yields on American bonds do too," Inbar says. "An investor in emerging markets asks himself whether to reduce his exposure, when he can get risk-free returns of 5% or 6% with linkage to a dominant currency like the dollar or pound."

But the foreign investors' attitude to Israeli companies is intriguing, he says, and for one thing, other emerging markets don't have companies in the class of Teva Pharmaceuticals (TASE, Nasdaq:TEVA), Check Point Software Technologies (NASDAQ:CHKP), Agis Industries (TASE: AGIS), Mercury Interactive (Nasdaq:MERQ) or Lipman Electronic Engineering (Nasdaq, TASE: LPMA ). "These are exporters affected more by the global economy than developments in the domestic one," Inbar clarifies. "The Israeli market incorporates geopolitical risks but past experience shows that changes on the geopolitical front affect the big Israeli companies only on the margins."

Among these big exporters, he says, a balance is created between the general attitude regarding Israel, and their own performance, which is only slightly affected by the scene in Israel.

He makes another interesting point: when analysts covering the stock of a major Israeli exporter feel the share price is reflecting the geopolitical situation in the Middle East rather than the company's own situation, they point investors to it as a buy opportunity. "That creates an interesting balance," Inbar says.

That balance will be called into question at the investor conference Merrill Lynch is organizing. Held over four consecutive days, half in London and half in New York, Merrill Lynch will be introducing corporations to the 50 biggest investors in the world, including fidelity, Alliance, Franklin, and Templeton.

The blue-chips among the Israeli pack are invited: Partner Communications (LSE, TASE, Nasdaq: PTNR ), Bezeq (TASE: BZEQ ), Bank Leumi (TASE: LUMI ), Bank Hapoalim (TASE: POLI ), United Mizrahi Bank (TASE: MZRH), Given Imaging (TASE, Nasdaq:GIVN), Elbit Systems (Nasdaq:ESLT), Koor Industries (NYSE:KOR), Israel Chemicals (TASE: CHIM), Makhteshim Agan Industries (TASE: MAIN ), Ness Technologies (Nasdaq:NSTC) and of course Lipman Electronic Engineering (Nasdaq, TASE: LPMA ).

The companies will have a chance to strut their stuff before the investors, and their officers will be able to meet one on one with representatives of the investment banks, turning the conference into a sort of giant road show.

The major foreign investors have an affinity for certain sectors, such as telecommunications, the banks, technology and of course drugs.

For all the above disclaimers, Inbar says the foreign investors are keeping an eye cocked on developments in Israel. Advance toward peace would improve the nation's macroeconomics, which could only do good things for the companies, however immune they are to geopolitical judders. Right now the Tel Aviv Stock Exchange seems to be on hold, and if anything, the escaping steam is an attraction for the foreign investment crowd, Inbar sums up.

http://www.themarker.com/eng/article.jhtml?ElementId=%2Fibo%2Frepositories%2Fstories%2Fm1_2000%2Fnc2...

Midas
TEVA-a class by itself.



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