Investors Bet on Israel Tech Stock Windfall Under Trump

Companies tipped to gain include defense contractor Elbit Systems, Magal Security Systems and Check Point Software Technologies.

The Israeli flag hangs outside the New York Stock Exchange on Wall Street in New York December 1, 2014.
REUTERS

Investors are betting heavily that Israeli defense and cyber-security firms will reap a windfall from President Donald Trump's big U.S. spending plans, although likely benefits for the wider economy remain like the man himself - hard to predict.

Israeli technology companies are likewise well placed to pick up contracts on other planned presidential projects, such as a hugely expensive wall along the U.S. border with Mexico.

Economists, however, have yet to factor any positive "Trump effect" into their Israeli growth forecasts and analysts say some of his ideas, such as moving the U.S. embassy to Jerusalem, could backfire with negative security and economic consequences.

After a month in office, some of Trump's Twitter commentary has caused bewilderment in a number of foreign capitals. But in Israel, hopes are high for stronger commercial and strategic ties with the United States, and that warmer political relations will encourage foreign investors.

Companies tipped to gain include defense contractor Elbit Systems, Magal Security Systems and Check Point Software Technologies. All have seen their share prices soar since Trump's election victory on Nov. 8.

Those, and many other Israeli companies, either have U.S. subsidiaries or are incorporated in the United States - a useful hedge should Trump stick to his "America first" promise of giving priority to domestic industry.

Israeli Prime Minister Benjamin Netanyahu met Trump in Washington last week, building on expectations of a friendlier relationship with the Republican president after a fractious eight years dealing with Democrat Barack Obama.
 
"In the world of investing and economics, perceptions matter and I believe investors will notice," said Steven Schoenfeld, founder of BlueStar Indexes, which develops indexes and exchange traded-funds that track Israeli stocks.

BlueStar's Israeli technology ETF has gained 13 percent on the U.S. Nasdaq market since the election. So far, the effect on the wider market has been less remarkable. While Tel Aviv's broad index is up 6.1 percent, it has underperformed the MSCI World index for developed countries, which has risen about 8 percent in the same period.

The United States is Israel's largest trading partner by country, with bilateral commerce valued at $25.7 billion last year. Of this, more than two-thirds were Israeli exports, giving the country a large surplus.

One stock that has already seen a big surge is Magal, whose sensors and command and control systems help to secure airports, borders, power plants, seaports and prisons.

Investors expect it to provide technology for the Mexican border wall, a contract that could reap vast rewards given that the project is expected to cost around $20 billion.

With Magal's shares up nearly 60 percent since the election, Chief Executive Saar Koursh is optimistic of winning work on the wall. "Our chances are more than good," he told Reuters, noting that the company, through its U.S. unit Senstar, was in touch with U.S. government officials. "This definitely would be a large scale project for us."