Union Bank of Israel (TASE: UNON) says in its weekly review that its outlook for local and overseas markets remains positive, in view of the continued slowdown in inflationary pressures and the likelihood of interest rate cuts in the US and Israel. Union Bank also notes the strong third quarter reports posted by companies both locally and overseas.
Union Bank also notes that the Tel Aviv 25, Tel Aviv 100, and Tel Tech indices all have reasonable profit multiples, although the TA Real Estate 15 Index is a bit expensive. The TA Real Estate Index has climbed 6.6% since the beginning of last week and 70% since the beginning of the year. The Tel Aviv 25 Index climbed 8.2% since the beginning of the year while the Tel Aviv 100 Index climbed 10.5%.
Union Bank expects the Tel Aviv 25 Index to have support at 783.65 points with the closest resistance level at 898.98 points.
As regards the interest rate, Union Bank says that as expected, the Bank of Israel lowered the interest rate to 5.25%, thereby closing the interest rate gap between Israel and the US. The cut was in line with the estimates of economists, who feel that the interest rate should be lowered gradually rather than making a sharp cut, to avoid causing instability in the markets, and to monitor the dollar’s response to the interest rate change.
Commenting on the foreign currency market, Union Bank notes that there has been a change of direction after a long period during which the shekel strengthened against the dollar, largely as a result of the interest rate cut and expectations that the Bank of Israel will make a further cut next month. This is likely to bring the gains for the shekel against the dollar to a halt, at least for the time being.
Union Bank expects the shekel-dollar rate this week to be NIS 4.25-4.31/$. The nearest support level for the shekel-dollar rate is NIS 4.2536/$, followed by NIS 4.238/$.
Published by Globes [online], Israel business news - www.globes.co.il - on October 29, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006