(Bloomberg) -- Israel’s stock benchmark led gains globally as banks rallied on a report by Barclays Plc that said lenders are well shielded from risks in the real estate sector.

The Tel Aviv Stock Exchange 35 Index advanced as much as 2.6% to the highest level in eight months. About a quarter of the gains came from the shares of three banks banks — Bank Leumi Le-Israel BM, Israel Discount Bank Ltd. and Bank Hapoalim BM. 

Wednesday’s rally took the benchmark up 8% this month, erasing 2023 losses, even as protests spread over Prime Minister Benjamin Netanyahu’s controversial plans to reduce oversight powers of the nation’s judicial system. 

Israel is still one of the cheapest markets globally. The main index trades at 7.8 times the projected earnings of its members, a 37% valuation discount to its emerging-market peers.

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While real estate is seen as a weak link globally as central banks continue to hike rates, Israeli banks have adequate protection against stress scenarios including writedowns, Barclays strategists Tavy Rosner and Chris Reimer wrote in a note Wednesday. They’re still overweight the three lenders, as well as Mizrahi Tefahot Bank Ltd. 

“Banks can sustain as much as 8% write-downs of their commercial real estate segments,” the strategists wrote. “Banks have significant levels of insurance which covers, for the most part, guarantees to homebuyers and loans for land.”

Stable economic growth, increased rental activity and low loan delinquencies all suggest concerns about real estate risks are overdone, the analysts said. 

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