Israeli Stocks Slump, but Broad Impact Not Foreseen : Markets: Country’s 100-share Mishtanim index falls 3.3% on Sunday. A muted reaction is expected on Wall St. today.

The Israeli stock market slumped Sunday but investor nervousness over the assassination of Prime Minister Yitzhak Rabin was not expected to have far-reaching consequences for U.S. markets and other major global exchanges.

The reaction today on Wall Street is expected to be muted because Israel is not a major participant in global markets. Analysts said that Saturday’s assassination of the Israeli leader could spur some modest flight-to-quality buying of dollars, gold or Treasury securities.

“I expect market reaction to be subdued,” said Marc Chandler, currency strategist at Deutsche Morgan Grenfell. “If this was done by a Palestinian or an Arab, I think arguably there might be more of a reaction. It would mean chances of Israeli retaliation,” threatening the fragile peace in the Mideast.

In Tel Aviv on Sunday, all 100 stocks that make up the Mishtanim index fell. The index finished down 6.32 points, or 3.3%, at 183.87, in the biggest one-day drop since April.

Traders said volume was moderate and that prices did recover somewhat from a steeper early drop. Some investors criticized the Tel Aviv Stock Exchange for not suspending trading for the entire day.

Analysts said many Israeli investors will be closely following how American investors treat shares of Israeli companies trading in U.S. markets today.

Meanwhile, the dollar rose slightly in Tokyo early today, trading at 103.90 yen in morning activity, up from 103.85 at the close in New York on Friday.

Gold opened in Tokyo at $382.50 per ounce, up marginally from $382.40 in New York on Friday. And Tokyo’s Nikkei-225 stock index was up 29.09 points to 18,057.89 in early trading.

The dollar has risen in the last two weeks as the crisis affecting Japan’s Daiwa Bank has unfolded and as Russian President Boris N. Yeltsin has remained hospitalized. Political violence in the Middle East has boosted the dollar in the past.

“I think the safe haven argument, whenever there are international tensions or crises, is positive for the dollar, but I wouldn’t think it would have a lasting effect,” said Klaus Holschuh, an analyst at Comerzbank in Frankfurt, Germany.

As for Israel, some observers said Rabin’s death could prove to be a catalyst for additional foreign investment in the Jewish state.

Ido Aharoni, Israeli consul for communications in Los Angeles, said the assassination is expected to prompt greater foreign investment as people reach into their pockets to help the country. A surge in tourism is also expected.

“In an ironic way, this is bringing people together,” he said. “It will strengthen Israel.”

The foreign-investment picture for Israel had been looking increasingly hopeful. Its economy has grown by at least 6% in real terms in each of the last five years, with growth this year forecast at 6.8%. At the same time, Israel has managed to trim inflation. Prices are officially forecast to rise 8.2% this year after having jumped 14.5% in 1994.

The improved economy has attracted increasing foreign interest. The Bank of Israel said total direct foreign investment soared to $628 million during the first six months of 1995, more than double the sum invested in all of 1994.

Buoyed by such investor optimism, Israel has been preparing to borrow money in the international bond markets under its own name for the first time. It has been planning a $200-million bond sale to U.S. investors later this month.

The move is intended to pave the way for more regular borrowing in the future. Until now Israel has raised money through Israel Bonds, a private corporation that acts on the state’s behalf. In the absence of government bond sales, Israel’s financing has come in part from a $10-billion U.S. loan guarantee program.

Despite the worries accompanying Rabin’s killing, Israeli companies seem ready to move ahead. Conglomerate Koor Industries Ltd., which accounts for 7% of Israel’s entire industrial output, plans to go ahead with its first international securities offering this month in New York, a spokesman said.