Investors in Israeli stocks are disregarding a war less than 60 kilometers (37 miles) away from the commercial center in Tel Aviv, helping the TA-25 index rebound from its worst year since 1983, on bets fighting will be limited. The benchmark TA-25 index has climbed 7.4 percent since Dec. 27 when Israel started its campaign against Hamas in the Gaza Strip, tracking a rise in global equities. The Standard and Poor’s 500 Index gained 6.8 percent in the same period. Israel’s index added another 1 percent yesterday even as the government broadened its offensive by sending ground forces into Gaza, and protests in the Muslim world against the invasion spread. Shares also rose in Egypt and the Gulf. “We won’t see any impact on regional markets because it’s clear the crisis is going to be contained,” Rami Sidani, head of Middle East and North Africa investments at Schroders Investment Management Ltd. in Dubai, said in a telephone interview. “If the issue were to take on other proportions, things may change.” Stocks are advancing after the TA-25 tumbled 46 percent last year as the economy grew at its slowest pace since 2003 and consumer spending weakened. Investors now are more focused on the performance of global stocks than on Israel’s push to take over areas used by Hamas to launch rockets at the nation’s southern towns and cities, said Daniel Goldstein, the head of international sales at Prisma Capital Markets Ltd. in Ramat Gan. Arab Demonstrations About 500 Palestinians and 5 Israelis have been killed in the fighting, according to the Palestinian emergency services department in Gaza and the Israeli government. Demonstrations in Jordan, Iran, Kuwait, Lebanon, Yemen and Turkey grew yesterday as Arab leaders increased diplomatic efforts to end to the violence. Still, nearly all Israeli factories within striking distance of Palestinian rockets remained opened, the Manufacturers Association trade group said yesterday. Goldstein, whose firm manages 30 billion shekels ($7.9 billion), said while some employees at the investment house have been called for reserve duty, “business carries on as normal.” Israeli stocks last year posted their worst performance since 1983, valuing shares at 13 times earnings at the end of 2008, compared with almost 19 times in June. The economy expanded 4.1 percent, its slowest pace since 2003, as exports and consumer spending cooled because of the global credit crunch. The TA-25 Index fell 0.3 percent to 671.99 at 10:47 a.m. in Tel Aviv. The S&P 500 gained 3.2 percent to 931.8 on Jan. 2, the highest in two months, as governments in the U.S., India, China and Taiwan increased efforts to spur economic recovery amid the worst global financial crisis since the Great Depression. Shekel Gains The shekel has also climbed since the fighting began, gaining 1.8 percent against the dollar. Israeli government bonds have tumbled, with yields rising yesterday by the most in more than a year, as the decline in U.S. Treasuries, a government offering today and concerns that the widening offensive may impact the budget lowered demand for the notes. The yield on the benchmark Mimshal Shiklit notes climbed six basis points to 5.05 percent. The 5.5 percent securities due February 2017 dropped 0.40 shekels to 107.60. Bond yields move inversely to prices. “In the negative scenario where the operation develops into a long extended war in which Israel captures some of Gaza’s territories, there will be a significant impact on the budget, tourism and foreign investments,” said Michael Sarel, the chief economist at Harel Insurance Investments Ltd. “In the positive scenario, in which the operation will be short and successful and will end the rocket attacks on its southern towns and cities, the economic outcome will be positive because of less uncertainty about the budget.” Bank-Led Gains Bank stocks in particular are continuing their New Year’s rebound with the TA-Bank index rising 1.9 percent to 644.85, the highest in two weeks. Israel Chemicals Ltd., which extracts minerals from the Dead Sea, and Makhteshim Agan Industries Ltd., the world’s biggest maker of generic agrochemicals, gained as commodity prices climbed. Elsewhere in the Middle East, Egypt’s CASE 30 Index and Saudi Arabia’s Tadawul All Share Index, the Arab world’s biggest stock exchange by market value, increased 8.1 percent since the beginning of the conflict. The TA-25 Index rose 3.6 percent in the month-long Second Lebanon War that broke out in July 2006 after two soldiers were abducted in a cross-border ambush by the Shiite Muslim Hezbollah militia. Their capture of the reserve soldiers led the Israeli military to begin a bombardment of Lebanon, destroying roads, bridges and other infrastructure. In response, Hezbollah fired thousands of rockets into Israel. About 1,200 Lebanese and 159 Israelis were killed in the conflict. “Although the information coming out of the battlefield is more heavily controlled than in the Lebanon War, by all appearances the operations seems to be going well for Israel,” said Ira Slomowitz, a trader at Ramat Gan, Israel-based Excellence Nessuah Securities & Investments Ltd. “There are reports of only minimal casualties for the Israeli army while Hamas has been hit hard.”

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