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MERRILL LYNCH SAYS ISRAEL’S RECLASSIFICATION AS DEVELOPED MARKET APPEALING

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Tuesday, March 9th, 2010

Merrill Lynch analysts said Israel’s upcoming classification as a developed market by Morgan Stanley on May 31 would make the country stand out among its peers.

Calling the move a natural progression, the analysts said the Israeli market’s higher commodity prices, relatively high dividend payouts and economic stability that were less attractive to emerging market investors, make it stand out with the new peer group.

As reported in Invest In Israel, the Israeli economy is stable compared to countries like Portugal, Ireland, Greece, Spain, and Dubai, which is reflected in considerably lower spreads on credit default swaps. In addition, Israel’s 2% population growth rate gives a boost to its GDP growth.

According to Merrill Lynch there are several reasons to invest in Israel, including a high cash level among local institutional investors. Noting that the Morgan Stanley Israel index has outperformed in recent “mega” crises, including the Asian debt crisis in the late 1990s, Merrill Lynch said the relatively large weighting (65%) of pharmaceutical giant Teva in the Israel index makes “any global crisis quite irrelevant for the index.”