THE first Israeli company to seek a full listing on the London Stock Exchange decided yesterday to put off the offering due to political tension in the Middle East, the sponsors of the issue said.

London based Societe Generale Strauss Turnbull Securities, one of the sponsors, said in a statement that Plasson Ltd had decided not to proceed for the time being with its placing of shares and admission to the official list of the London Stock Exchange.

Although Plasson's early marketing efforts with institutional investors resulted in their proposed placing being more than fully covered, the deterioration in the political situation in the Middle East has caused the company and its joint sponsors to recognise that they are unable to proceed with the original timetable," the statement said.

Just a few weeks ago the £20 million sterling offering appeared headed for success.

But when bloody clashes erupted between Israelis and Palestinians, killing 74 people and casting doubts on the future of the Middle East peace process, foreign investors began to get cold feet.

Plasson, a kibbutz company, is a leading maker of plastic connectors for polyethylene pipes, with 85 per cent of its sales in exports. Last year it had sales of £52.4 million sterling, on which it earned £4.4 million.

In the first half of this year it had sales of £28 million, earnings of £2.9 million and a 35 per cent annualised rate of growth.

Last week, another Israeli company, Nechustan Metals, postponed an offering on London's Alternative Investment Market scheduled for November to early next year due to the violence.

The tension between Palestinians and Israelis has also hurt the Tel Aviv stock market, where daily trading volume has fallen to about $14 million (£8.8 million), the lowest level in years.

Foreign investors say the government must take steps to put the peace process back on track. "If the process is impeded, then companies will leave the land, institutional investors will desert en masse, Israel's economic activity will slow visibly and it will be impossible to finance growth by internal means. In short, Israel needs foreign capital and foreign companies," Societe Generale warned in a recent report.

Analysts note that Israel's rapidly growing high tech sector, which tends to prefer Nasdaq listings, is still attracting foreign interest.

Three Israeli high tech companies have held successful public or private placements in the United States in the past two weeks.