“Given the current interest rate, reasonable price levels and multiples and positive economic data, our outlook for the local market remains positive. However it should be noted that it will be difficult, technically, to break through the 1,000 point level,” says Union Bank of Israel (TASE: UNON) in its weekly review.
Union Bank reiterates its recommendation to limit the proportion of Israeli securities to 50% of the investment portfolio, with the rest spread across markets overseas. The bank notes that last week the Bank of Israel published its twelfth month inflation forecast, which predicts inflation of 1.1%, compared with 1.7% forecast by the other banks. Union Bank itself expects 1.9% inflation this year, with the Consumer Price Index (CPI) likely to fall again in February, but then rise in the March for the first time in 2007.
Union Bank adds that at the current 4.25% rate, with a 1% negative gap against the US interest rate, the shekel is still holding its own against the dollar, and the fall in the CPI in January was expected. In view of this, the Bank of Israel could make a further cut in the interest rate tomorrow.
Union Bank expects that the shekel-dollar exchange rate will be NIS 4.18-4.24/$ this week. The closest support level is NIS 4.176/$, with resistance at NIS 4.251/$.
Published by Globes [online], Israel business news - www.globes.co.il - on February 25, 2007
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