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Tom Lydon, ETF Trends (166 clicks)
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Israel’s country-specific ETF may be an attractive international play, given that it performs like an emerging market. The country’s economy is actually considered to be developed, with strong biotechnology, technology and pharmaceutical sectors. Health care reform could be the tipping point.

Israel’s GDP diminished a scant 0.3% in 2009, compared to the 2.4% drop in the United States and the 4% decline in the European Union, writes Don Dion for TheStreet.

One potential driving factor for Israel in the coming months and years is health care overhaul. Israel is home to the world’s largest generic drug maker, Teva Pharmaceuticals (TEVA), which could see a stampede of new customers as the new legislation takes effect. Teva is a hefty 24% of iShares MSCI Israel (EIS).

But there are other reasons that Israel is looking increasingly appealing:

  • Before the financial crisis, Israel engaged in strict lending standards that allowed its banks to avoid much of the subprime mortgage issues that confounded other countries.
  • A high savings rate and lower consumer debt levels also helped the country avoid a decrease in personal consumption when economic activity plummeted everywhere else.
  • Recent economic data coming out of Israel is also painting a rosy outlook for the country. Home prices have increased in value in the fourth quarter of 2009 year-over-year, whereas other countries experienced stagnant or dropping prices.
  • Consumer confidence has risen to a 10-year high through February.
  • Israel’s economy hosts a highly developed export market that includes companies in the high-technology and biotech sectors.
  • iShares MSCI Israel Cap Invest Mkt Index (EIS). The fund has 81 holdings and an expense ratio of 0.66%.
  • Top Sectors include: Financials 24.23%, Health Care 23.93%, Materials 13.59% and Telecommunication Services 10.61%.

    Top allocations include: Teva Pharmaceutical (TEVA) 23.9%, Israel Chemicals Limited 8.8%, Checkpoint Software Technologies (CHKP) 7.5% and Bank Leumi Le-Israel 6.9%.

ETF EIS

  • First Israel Fund Inc. (ISL). ISL is a closed-ended fund.

ETF ISL

Max Chen contributed to this article.

Disclosure: None

Source: What U.S. Healthcare Reform Means to the iShares Israel ETF