Israel Financial Update: March 2011

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In surprising economic news, Israel's Gross Domestic Product (GDP) rose 7.8% in the fourth quarter of 2010 (5.4% in 2010).

The Shekel continues to strengthen against the dollar, gaining another 1% in February, 2011. Israeli investment account holders enjoyed this benefits as their holdings are in Shekels.

Israeli stocks continue to perform well in 2011. Perrigo, a leading Israeli health care company, gained 15% in the past two month (and 43% in the past 12 months).  The bio-medical technology company Given Imaging increased 32% so far in 2011, while the popular grocery chain Rami Levi added 12% this quarter (57% in the past year).

Israel's Central Bank again raised its interest rate an additional 0.25% to 2.5% last week, which continues to make Israeli government and corporate adjustable-rate bonds held in a Shekel account even more attractive.

Israel now ranks as the world's third strongest real estate market, according a report published last weekend by the respected magazine Global Property Guide. The review shows that in the fourth quarter of 2010, housing prices jumped at a nominal rate of 16.2%, compared to the fourth quarter of 2009. This compares to the United States, where home prices fell by 4% since the fourth quarter of 2009. Despite efforts by the Bank of Israel to cool the slow the rapidly rising real estate market, housing prices barely cooled, according to the Guide, indicating that the last six quarters saw double-digit increases, and has become an attractive investment for foreign investors. See our article on REITs as a way to gain exposure to the Israeli real estate market through stock.

Israel continues to become energy independent. The area of Israel surrounding the Gaza Strip, the "Gaza Envelope", is to become the center of Israel's solar energy industry, according to an initial mapping of the areas in which medium-size solar installations will be constructed, carried out by the Israeli Electric Public Utility Authority.

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