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Israel Intrigue With ETFs


Since MSCI promoted Israel to developed market status, the country has not seen its status in various multi-country developed market exchange traded funds increase. Fortunately, Israel is accessible via two exchange traded funds, both of which have delivered for investors this year.

The iShares MSCI Israel Capped ETF (EIS) , the older of the two Israel ETFs, and the Market Vectors Israel ETF (ISRA) are up an average of 7.6% this year. Israel’s easy monetary policy and sturdy economic growth have helped bolster both ETFs.

Health care exposure has also helped. EIS and ISRA each feature health care as their second-largest second allocation at weights of 24.4% and 30.3%, respectively. Teva Pharmaceuticals (TEVA) is the largest holding in both ETFs at weights of 23.8% in EIS and 14.4% in ISRA. [Teva Could Lift These ETFs]

“Israel’s economic growth has been resilient even amid a period of weak global trade expansion. The 3.3% 2013 number should be replicated in 2014 and 2015. The country has seen a strong start to major natural gas production. As production expands it will moderately continue to contribute to growth. Even larger fields are expected to come online in 2018, providing another significant boost to GDP,” notes Accuvest Global Advisors.

Israel ranks second in the Accuvest model of 32 country rankings. That is up from ninth in March. Of those 32 countries, Israel’s three- and six-month scores place first and second while the country’s 18-month relative beta also ranks first, according to Accuvest data.

EIS has a beta of 0.8 and a three-year standard deviation of 19.8%, according to iShares data.

Israel offers another trait investors have come to prize over the past year: A current account surplus. Israel’s surplus has been fueled by the country’s status as a growing natural gas producer as well as its burgeoning technology sector. [Account Surplus Trade With ETFs]

“The Current Account is in surplus and is growing with more momentum likely as natural gas production expands. The country has seen FX reserves triple since 2008. Government debt ratios and fiscal deficits have declined,” notes Accuvest.

Market Vectors Israel ETF


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.