Foreign investors are not yet avoiding the Israeli equity markets despite the deep plunge on the Tel Aviv Stock Exchange last week as the escalation of violence in the north took center stage. "There is a big buying opportunity in the market as equity price levels are very attractive, which, in particular, foreign investors are taking advantage of," said Dan Farhi at Excellence Nessuah Securities. "Foreigners have been the net buyers, while Israeli investors scaled back some of their exposure to the domestic market." Farhi added there was an assumption in the market and among investors that the turmoil in the north would not escalate over months and that the impact on the economy would be limited. "We hope to see the security situation resolved by the end of the month, at which point the market will be at a turning point," Farhi said. On Excellence Nessuah's list of recommended stocks are Bank Hapoalim, Israel Discount Bank, MA Industries, Israel Chemicals Ltd., Bezeq and Teva Pharmaceutical Industries Ltd. The TA-25 index took another hit early Sunday, shedding another 3 percent to 726 but rebounded in afternoon trade to end the day with its biggest one-day gain in two-and-a-half years, closing up 3% at 772. Similarly, Bank Leumi said in its weekly report that the excessive market reaction to the escalating security situation had pushed share prices to a level that was attractive for investment. "Investors should, however, take a cautious approach to exploit the low level of stock prices and start collecting recommended shares as the positive macroeconomic momentum in Israel continues to be strong," the bank said. According to a study based on the reaction of the US stock market during times of war by investment house Green Bull of Israel Discount Bank, the sale of shares at any price in those circumstances is not worthwhile. "We recommend not to rush to sell shares off but to adopt a longterm view and use the opportunity of the sharp declines in the market in order to buy shares of good companies at attractive prices." Yaron Rapaport, an analyst at Green Bull said that in years of war the market saw high average annual returns of 15.13%, whereas in years of no wars, the market saw average annual returns of 9.17%. The study, which researched US market returns over the past 200 years, showed that stock markets initially react excessively to uncertainty at the time of war but recover and gain high ground once the uncertainty is cleared and the worse is past. Against this backdrop, however, Bank Hapoalim warned investors that the risk level in the equity market was high and said an investment in this segment was not justified. "We believe that the severity of recent events outweigh positive economic developments of recent quarters. Therefore, based on an analysis of the risk/return ratio, we recommend a limited exposure to the equity market even if price levels seem cheaper now." For those still interested in investing part of their portfolio in equities, Hapoalim recommended focusing on duallisted and export-oriented shares since these companies would be less harmed by a deterioration of the security situation. Further, in order to reduce risk in the portfolio, the equity component should be diversified with equity markets abroad, it said.