Although bearish on Israeli equity investments given the country's "defensive" nature and the firm's desire for more risky markets, HSBC Holdings is forecasting continued gains for Israel's real estate market - particularly the high-end. "Rising demand and a lack of supply have resulted in increasing real estate prices in Israel," HSBC analysts wrote in a note to clients Tuesday, noting that the upper end of the market and properties in the sought-after central region look to have been the main beneficiaries of the trend. "Not only are buyers interested in new properties, but the feeling of being relatively better off financially than a few years ago pique interest in more expensive, higher-end properties," the analysts said. Commercial and office real estate values are also rising, according to the analysts, who identified the return of the high-tech sector, a low supply of grade A buildings, the entrance of insurance companies into the market and the arrival of real estate investment trusts as factors that are likely to help the trend continue in coming years. Elaborating on the firm's downgrade of the country to "underweight" earlier this month, the analysts said the defensive nature of Israel's equity market has been appealing during the period of turmoil in Europe, Middle East and Africa (EMEA) and global emerging markets (GEM). Analysts noted that the MSCI Israel index outperformed the MSCI EMEA and MSCI GEM indices by 10.6 percent and 6.6% respectively in the past week and by 15.8% and 12.4% in the past month. Until the current macro tensions are resolved, the analysts believe emerging markets are likely to remain fragile, with the short-term downside possibly further amplified but with Israel possibly bucking the trend given its stable economic footing and traditional equity market endurance. "Israel is a solid market that is outperforming in the current equity crunch, but we see more headroom across the emerging market after recent falls," the HSBC analysts said. "Looking past short-term emerging market instability, we want to increase our exposure to risky markets and reduce holdings of defensive entities." Even so, the firm has some top stock picks in the country, identifying Bank Hapoalim and Bank Leumi as having potential upside, as well as Azorim, Aloni Hetz and Bayside in the real estate sector. In technology, HSBC said it favored Nice Systems, whose latest acquisitions, it said, positioned the company as the worldwide market leader in the enterprise segment. Deutsche Bank raised its rating on Israel over the weekend, citing its defensive nature, and highlighted Israel Discount Bank and Leumi as domestic plays.