Considering its diminutive size, Israel garners an inordinate share of global headlines. That's been even more evident in recent weeks, as the nuclear threat from Iran, a Palestinian election and the major illness of Prime Minister Ariel Sharon have kept the country on the front page.

Mutual fund manager Gadi Beer, however, wonders why the press doesn't often feature Israel in the business section as well.

Beer, portfolio manager for the $13 million

(AMDEX) - Get Report

AMIDEX35 Israel index fund, says investors should look past the geopolitical news and focus more intently on the growth of Israel's economy and its burgeoning stock market. Beer's fund tracks the 35 largest stocks in Israel, with

Teva Pharmaceuticals

(TEVA) - Get Report

as its biggest holding, comprising 18.5% of the fund's assets. Other large holdings in the fund include well-known tech companies

Amdocs

(DOX) - Get Report

,

Check Point Software

(CHKP) - Get Report

and

Comverse Technology

( CMVT). The AMIDEX35 Israel fund is up 2.25% year to date after rising 14.2% in 2005 and 14.9% in 2004, according to Morningstar.

Beer spoke with

TheStreet.com

about Israeli stocks and the current events that may or may not affect them.

How do the current escalated tensions between Israel and Iran over Iran's nuclear ambitions affect Israeli stocks?

I don't think that the escalation of tensions is necessarily between Iran and Israel. It's true that you can find plenty of name-calling in the news from both sides, but Iran is in the spotlight of the whole world, the U.N. nuclear inspectors, and more importantly, the United States. Israel is not the one to lead the front against them, although, as we learned more than 20 years ago in Iraq, when the going gets tough, Israel gets the job done. Can you imagine what the Gulf War would have looked like if Israel hadn't destroyed Saddam's nuclear plant back then?

How does Ariel Sharon's serious illness affect the Israeli economy and, in turn, Israeli stocks?

A recent Goldman Sachs report expects a 4.2% growth in 2006 despite Sharon's illness. Based on ongoing updates, Mr. Sharon's condition is already well priced into the market. On the day of the announcement, the market dropped 7% and corrected back up, ending with only a 4% drop. It is obvious at this point that he will not be able to return to work, but we hope that the guidelines to peace that he established will continue by the Kadima party.

To view Gregg Greenberg's video take of this report, click here

.

What about Palestinian politics? How does the victory of the Islamic faction Hamas in the Palestinian election affect the Israeli economy, and then, of course, Israeli stocks?

Great question and even a greater misconception. We've been arguing for years that there is no or very little correlation between Israel's political and economic situations. As an example, a recent research by Israel's Securities Authority shows that the average impact of suicide bombings on Israeli-traded stocks is only negative 0.4%. On top of that, Israel's economic commitment to the safety of its citizens does not fluctuate based on the party running the Palestinian Authority.

What is your view of Israel's economy? It was hit hard after the tech bubble burst. Has it come back? Is it still too dependent on tech, drugs and banks?

Again, that is a popular misconception. Many Israeli tech companies suffered by the burst of the technology bubble, but that's not Israel. I'll give you some numbers. In 2001, just before the burst, the TA100 was approaching the 600-point mark. The

Nasdaq

around the same time broke the 5,000 points mark.

Now look at the two markets today. The Nasdaq is still at about half of its 2001 valuation, and the TA100 just yesterday broke again an all-time record at 860, over 40% from its 2001 high.

OK, I'll buy that. Finally, I know you are an index fund, but do you have any favorite sectors or stocks?

At the AMIDEX35 Israel Mutual Fund we see Israel as a whole as the sector. As you said, the fund is an index fund tracking the 35 largest Israeli companies. We don't pick and choose stocks. I like Israel as a sector because of its people, its brain power, and regardless of whether the company is traded on the Tel Aviv Stock Exchange or the Nasdaq, it still has a significant part of its operations in Israel.