Israel Outperformed World Markets During Crisis

Evan Liberman Articles, Invest in Israel, Israeli stocks 0 Comments

Why invest in Israel? Because Israel's economy outperformed many other economies during the recent global recession. Here are some of the ways in which Israel's economy performed well. This may explain why foreign investors are putting billions of dollars in Israel and what makes its economy so special. Investing in Israel isn't just for the mega rich or sophisticated investor; this article is about why you should consider linking some of your money with Israel regardless of the amount or your investment experience.

This is a part four of a four-part series on good reasons to invest in Israel:

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  • How Israel outperformed world markets during the global crisis (below)

How Israel outperformed world markets during the global crisis

  1. Investors in the Tel Aviv Finance index (purchased via ETFs) have gained 173% since February 2009. Israel had little international sub-prime exposure in the recent global housing crisis because of its strict regulatory environment when it comes to banks and mortgages. Unlike many banks in the West, none of the five largest banks in Israel had any large sub-prime exposure and didn't need to be bailed out by the State. The banking sector remained stable during the global credit crisis and emerged strong last year. These largest banks are all well capitalized and their capital adequacy ratio is much higher than the minimum required by Basel standards.
  2. Because of strict government and bank rules for minimum down payment on mortgages (now 30%), Israeli house owners weren't defaulting on their loans. Also, the local real estate market didn't plummet like many other Western nations.
  3. In 2009, Israel exceeded expectations and ended with a 0.7 percent annual growth rate following 4.0 percent for 2008 and 5.2 percent for 2007. The business sector, which was the most affected sector by the global economic slowdown, lost only 0.2 percent, following expansions of 4.5 percent and 5.6 percent in 2008 and 2007, respectively. Compared to the average growth rate of OECD member countries, which was negative 3.5 percent, Israel is definitely a bright spot amidst gray economic skies.
  4. Unlike other emerging countries, many of Israel’s leading multinational companies weathered the credit crisis and continue to expand both domestically and abroad. Companies like Teva Pharmaceuticals (TEVA), the world’s largest generic drug maker, generate most of their earnings from overseas markets. The top 25 Israeli multinationals had over $40B in foreign sales (including exports) in 2008 (20% of GDP).
  5. The Bank of Israel skillfully negotiated the treacherous waters of the recent global financial crisis. Stanley Fischer, the internationally acclaimed central bank governor, helped steer Israel’s economy back to growth amid the worst global recession since World War II. Fischer, who was Federal Reserve Chairman Ben Bernanke’s thesis adviser, preceded his colleagues’ October 2008 coordinated cut in interest rates as the global financial crisis unfolded, and in raising them when it ended. Participants of the International Monetary Fund meeting in Istanbul praise Israel and Central Bank Governor Stanley Fischer for bold moves resulting is the Israeli market showing stability and growth during the global recession. Fischer, an American, was previously Vice Chairman of Citigroup, First Deputy Managing Director of the International Monetary Fund, Head of the Department of Economics at MIT and Chief Economist at the World Bank.

How can I invest in Israel?

There are many ways to invest in Israel or Israeli companies, from buying [post=83 text="Israeli stocks on Wall Street"], ETFs or mutual funds, bonds, or investing directly on the Tel Aviv Stock Exchange from an Israeli investment account. You can read more on  [post=278] for details.

Keep checking back on Wise Money Israel (or get email updates) to gain more insight and tips on how to wisely invest in the Israeli capital market.

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