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Israeli Stocks Rise Modestly on Assurances

Markets: Netanyahu issues statement saying he favors a 'free economy' and seeks an 'atmosphere of stability.'

June 03, 1996|From Times Wire Services

JERUSALEM — Israeli stocks, which plunged last Thursday as Benjamin Netanyahu emerged as Israel's next prime minister, staged a modest rally Sunday after Netanyahu reassured investors he favors a "free economy" and will continue the peace process.

But investors were still uneasy over indications that Netanyahu might appoint former Gen. Ariel Sharon as his minister of finance.

Sharon, 68, was the architect of Israel's 1982 invasion of Lebanon and overspent his budget as housing minister from 1990 to 1992.

"Sharon is a real bulldozer, a freelancer," said Avi Meir, an investment manager at Tel Aviv's Israel General Bank. "There needs to be cooperation between the finance minister and the Bank of Israel, and Sharon is a loner."

Said another investment manager: "Sharon does not have a reputation for being big on fiscal responsibility. And to foreign investors, Sharon is not associated with positive things."

The investment community is also concerned that Netanyahu's party, Likud, might be forced to strike fiscally irresponsible deals with small religious and ethnic parties in order to create a workable coalition in the parliament.

"Investors are waiting for the government to say they will cut the budget and not yield to pressure from certain groups," said David Tobias of Lehava Investments. "In the longer term, the budget cuts will allow the government to reduce interest rates."

The markets recovered on their first trading day since Friday, when Netanyahu's victory over Labor Party leader Shimon Peres was confirmed.

The key, analysts said, was a statement Netanyahu issued through a spokesman shortly before trading opened in Tel Aviv.

The Maof index rose 1.78% to 217.93, and the Mishtanim index of 100 leading shares rose 1.91% to 205.23. About $24.7 million worth of shares traded, considerably below last Thursday's level and about even with last month's average trading level.

But the market was still well below its preelection levels. The indexes had declined 4.84 % on Thursday amid concern Netanyahu would slow the peace process and fail to implement needed budget cuts.

The statement Sunday said the prime minister-elect "attaches great importance to the creation of an atmosphere of stability that will lead to increased local and foreign investments."

It added that Netanyahu intended to have "a responsible economic policy and to support steps that will ensure stability, lower inflation and achieve continued growth in the Israeli economy."

Likud parliamentarian Dan Tichon, currently serving on the Knesset's finance committee, also made an unprecedented, and well-received, visit to the Tel Aviv Stock Exchange at the opening.

"Dan Tichon was greeted with rising share prices," Meir said. "Tichon is optimistic, and he was once a portfolio manager, so people believe him."

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