Gilat Leads Israeli ADR Gains as Risk Appetite Returns

Gilat Satellite Networks Ltd. led the longest streak of gains for Israeli stocks traded in New York in a month amid renewed demand for shares of technology companies and emerging-market assets.

The Bloomberg Israel-US Equity Index of the most traded Israeli companies on American exchanges rose for a third day, adding 0.1 percent yesterday in its longest streak since April 22. Defense company Gilat posted the biggest gain since Feb. 28 while Mellanox Technologies Ltd. jumped to the highest in almost two weeks.

Israeli companies are benefiting from a resurgence in demand for emerging-market equities as investors buy into initial stock offerings from new Chinese technology companies listing in the U.S., signaling improved sentiment, according to Josef Schuster, founder of Chicago-based IPOX Schuster LLC. Computer and software makers were the only group to advance among ten industries in the MSCI Emerging Markets index yesterday, advancing 0.7 percent.

“Israeli companies benefit from that, that the emerging markets are starting to outperform,” Schuster said in a May 20 telephone interview from Chicago.

Gilat jumped 3.6 percent to $4.85 while the shares traded at a 13-cent premium to Tel Aviv, the largest in three months. The Petah Tikva, Israel-based company reports earnings today.

Mellanox, the Israeli maker of equipment that speeds electronic data transfers, jumped 1.3 percent to $32.64 yesterday after Nomura Holdings Inc. reiterated its buy rating on the stock. Shares of Yokneam, Elit-Israel based Mellanox have risen for the past three days, the longest streak of gains in a month.

’Attractive Risk’

Shares of Mellanox have dropped 18 percent this year after first-quarter sales and earnings missed analysts’ estimates. That compares with a 0.2 percent gain on the Bloomberg Israel-US Equity index this year.

“Trading at 35 percent below its three-year average multiple, we believe Mellanox shares present a very attractive risk reward ahead of key catalysts,” Nomura analysts led by New York-based Sanjay Chaurasia wrote in a May 20 research note. A larger-than-forecast increase in sales of high performance computing should boost Mellanox revenue, the analysts wrote. They reiterated their buy rating and $48 price target.

Jumei International Holding Ltd., a Chinese online retailer of beauty products, has climbed 7.7 percent since raising $245 million in a public offering on May 15. Weibo Corp., the Chinese microblogging service owned by Sina Corp., is up 12 percent since its April 16 IPO.

The demand comes even as technology shares in the U.S. have declined this year amid concern that valuations were too rich. The Dow Jones Internet Composite Index of companies such as Netflix Inc. and Inc. has lost 8.8 percent since January and it is down 0.7 percent in May. That compares with a 5.4 percent advance in MSCI’s gauge of emerging-market technology stocks.