The country is mired in difficulties, but smart investors have spotted a bargain
Matthew Lynn City columnist
It was probably the first positive news out of Israel in the months since Hamas launched its brutal terrorist attack on the country. Bill Ackman, the founder of the giant Pershing Square hedge fund, bought a 5% stake in the Tel Aviv stock exchange as part of a wider $95m issue of fresh capital. It was the biggest vote of confidence in the Israeli economy since the war began.
True, Ackman may have been voting with his heart as much as his wallet. He has been an outspoken supporter of the Israeli government, and helped lead the campaign against Harvard and other elite universities in the US over their perceived tolerance of growing anti-semitism among their staff and students. That said, Ackman is also one of the smartest money managers in the world, with a fortune estimated at more than $4bn. He may just have spotted a bargain and decided to take advantage of it.
A hit to the economy
It is turning into a tough year for the Israeli economy. The Bank of Israel has already slashed its forecasts for growth this year. Government spending has soared to pay for the military operation. Travel for both tourism and business has been hammered, while many companies are left with only a skeleton staff because 360,000 army reservists have been called up since the conflict started, while more than 100,000 work permits for Palestinians have been withdrawn. It could get a lot worse. Even though Israel suffered a brutal and unprovoked attack, it has faced protests over its response, and there are calls for boycotts of its exports, or for companies doing business in the country. Add it all up, and it faces huge economic challenges.
Even so, Ackman may well have made a smart bet. Firstly, Israel has a thriving technology industry. Tech remains the fastest growing, most profitable industry in the world, and Israel has carved out a very strong ecosystem of startups, with venture capitalists and entrepreneurs building lots of new companies. Over the last decade it has emerged as one of the key hubs for computing and the internet in the world. Tech accounts for 18% of Israeli GDP compared with just 10% for the US, and less for most European countries. Tech products and services account for almost 50% of its exports and include increasingly well-known names such as monday.com, which manages workflows for small comp
