BOI: Investment surplus hit $35b. in '05

Israeli assets abroad grew 14% to $118.4b. from $103.6b. the year before.

Israel's investment surplus rose to $34.6 billion in 2005 despite Israeli assets abroad growing faster than non-resident assets in the country, the Bank of Israel said Monday. While foreign assets in Israel grew 12 percent to nearly $153b. from just under $135.5b. in 2004, Israeli assets abroad grew 14% to $118.4b. from $103.6b. the year before, the central bank said, calling both figures a "sharp rise." At the end of 2005, Israelis' investment in foreign shares accounted for 17% of their total investments abroad, while half of nonresidents' investment in Israel consisted of investment in Israeli shares, the Bank of Israel said. Among emerging markets, Israel's "unique feature," according to the central bank is that non-residents' direct investment in Israeli shares is directed mainly to the hi-tech industries, characterized by high risk and the prospect of high returns. Israeli assets abroad grew mostly through increases in portfolio investment, encouraged by the tax reform, while the business sector contributed to the growth primarily by repaying foreign-currency bank credit. Israeli commercial banks then found themselves with a surplus of foreign currency, which they deposited in assets and foreign securities abroad. Non-resident assets in Israel also grew through investments - both direct and portfolio - as well as price rises in the portfolio investments. "The increased profitability of the business sector, the contraction of the budget deficit, the improved geopolitical situation and the accelerated pace of privatization enabled Israel's economy to attract an unprecedented amount of non-resident investment," the Bank of Israel said.