The outcome of Israel's election - in which Likud Party leader Benjamin Netanyahu replaced Shimon Peres as prime minister - should be good news for the economy and investors, says James Ellman, a portfolio manager with LGT Asset Management in San Francisco.
Mr. Ellman is "cautiously optimistic" because of the Likud Party's platform and its stance that generally favors free markets, more so than Israel's Labor Party.
"The Likud Party platform specifically details that income taxes will be gradually reduced, privatizations will continue, and trade will be increased with the dynamic East Asian countries," said Mr. Ellman.
In addition, the party wants to increase immigration, which will create a larger population in Israel, which, in turn, will increase demand and attract added direct foreign investment.
These moves should stimulate Israel's economy more than would expanded peace with Arab neighbors, Mr. Ellman said.
"Right now, none of Israel's Arab neighbors can pose a credible military threat to Israel." Moreover, "the economies of Israel's neighbors are relatively small," he said.
LGT will be holding its positions for now as it awaits the naming of Israel's new cabinet. LGT has about a 2% weighting to Israel's market in both its emerging markets portfolios and in its global telecommunications industry portfolios.
"If reforms go through as expected, we would be looking to increase our positions in this market," said Mr. Ellman.
