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Israeli Stocks Beat the Market

A $1,000 investment in the S&P 500 in the US in 2000 would be worth $918 today. The same amount in Israel’s top index would have more than doubled.
By Tzvi Ben Gedalyahu
First Publish: 1/4/2010, 12:22 AM / Last Update: 1/4/2010, 12:11 AM

Israel in 2009, as well as from 2000, proved to be one of the best places to invest money. The popular Tel Aviv 25 index soared 75 percent in 2009 and now is only 8 percent from its all time high of 1,166 of two years ago, while popular averages in the United States climbed by less than 29 percent last year.

If an investor had put 1,000 into the TA 25 average at the beginning of the decade, he would now have more than $2,000. The same money in the Standard & Poor's 500 would be worth only $918 today, according to S&P analyst Howard Silverblatt.

While the old investment prediction “the market will fluctuate” holds true, Israeli analysts are optimistic for 2010. The economy withstood the global financial blowout better than most countries and far better than the United States, where scandals and bankruptcies ruptured faith in the entire capitalistic system.

The shekel, which in the past several years has reversed what used to be a seemingly eternal trend of weakening, has become one of the most stable currencies in the world. Inflation, which once was 500 percent a year, has consistently been under control for the past several years, even reaching a lengthy period of depreciating prices.

One unexpected impetus from higher consumer spending, which may encourage more economic growth, is last week’s cut in the Value Added Tax (VAT) by half a percent.

The strong business climate has led Bank HaPoalim and Bank Leumi to predict that the stock market record is within range. Israel's largest companies traded in Tel Aviv and in New York range from Teva Pharmaceuticals, the world’s largest generic drug maker, to Elbit Defense Systems, fertilizer exporters Israel Chemicals and Makhteshim-Agan as well as the technology sector.

Foreigners invested $1.2 billion in the Israeli stock market in 2009 following withdrawals of $2.8 billion in the second half of 2008, according to the Tel Aviv Stock Exchange.

While Israeli stocks have made profits for many investors, the indices in many Middle East countries declined last year, with Bahrain off 16.4 percent, Jordan down by 13 percent and Kuwait off 5.7 percent.