Belying Merrill Lynch's grim prediction that an election victory by opposition leader Ariel Sharon would discourage foreign investment, Goldman Sachs predicts that the TA-100 index, of the top 100 stocks traded on the Tel Aviv Stock Exchange, will gain 35% in 2001,

Yedioth Ahronoth

reports.

Goldman Sachs also predicts that if Sharon wins, he will establish a national unity government, in coalition with the incumbent One Israel party, headed by incumbent Prime Minister Ehud Barak.

The bank further predicts that a Sharon victory will not hinder the peace process or the TASE, and will accelerate handling of the national budget.

Merrill Lynch has downgraded the TASE from Neutral to Underweight based on the assumption that opposition leader Ariel Sharon will win the upcoming prime ministerial elections. Analysts say that the markets will go through an adjustment period if Sharon wins, and advise foreign investors to reduce their positions.

Market sources said earlier in the week that recent TASE losses can be attributed to foreign investors dumping some of their holdings.