Israeli shares slide after poll

Most investors believe Mr Olmert's win will be good for the economy

Israeli shares have fallen after acting Prime Minister Ehud Olmert claimed victory in the general election.

Mr Olmert's centrist-party Kadima won 28 of the 120 seats in the Israeli parliament after Tuesday's poll.

Analysts said they thought Kadima would win a more conclusive victory and it was unclear who would get the finance portfolio in the new government.

By late afternoon on Wednesday, the Tel Aviv 25 Index of leading shares was down 2.1% at 819.34.

The Israeli shekel, meanwhile, fell 0.5% against the US dollar.

Coalition uncertainty

Kadima emerged as the largest single party in Tuesday's poll, ahead of main opponents Labour and Likud, and will head a coalition government.

The issue here is economic Richard Gussow, Excellence Nessuah

Mr Olmert says he is willing to hold peace talks with the Palestinians, an approach investors feel will bring greater economic stability to Israel.

However, analysts expressed concerns that Mr Olmert may have to make major spending commitments to lure potential partners into a governing coalition.

The market fall also reflected concerns that potential coalition partners - which could include left-leaning Labour and the ultra-orthodox party Shas - could have clashing social and economic attitudes.

"The issue here is economic. That is going to be the problem," said Richard Gussow, an analyst at Israeli stockbrokers Excellence Nessuah.

"Right now there is a lot of uncertainty, particularly in relation to the finance ministry."

Israel's economy performed strongly under the leadership of Ariel Sharon, Mr Olmert's predecessor, who formed Kadima last year.