The Tel Aviv Stock Exchange (TASE) fell today. The Tel Aviv 25 Index fell 0.97% to 925.86 points, the Tel Aviv 100 Index fell 1.51% to 840.03 points, and the Tel-Tech fell 3.12% to 221.65 points. Turnover was NIS 2.38 billion.
Fear dominated the TASE today. The bad news from the US financial industry never stopped coming, resulting in Tel Aviv investors voting with their feet and selling while on the run. Nevertheless, a late rally eased the losses earlier in the day, when the leading indices were down more than 2%.
It is important to note, however, that the reaction on the TASE was fairly restrained compared with European markets, which tumbled 5-6% by midday. It seems that all the usual phrases, such as financial stability and economies of scale, which characterized the US financial system before the crisis, have failed the test of reality.
The first dramatic announcement of the day came when Merrill Lynch and Co. Inc. (NYSE: MER) announced that it would be acquired by Bank of America Corporation (NYSE: BAC) for $50 billion. The second announcement came from Lehman Brothers Holdings Inc. (NYSE: LEH), which declared that it was seeking Chapter 11 bankruptcy protection - the dying bleat of the venerable 158-year old fourth largest US investment bank.
If all this were not bad enough, the world's largest insurance company, American Insurance Group Inc. (NYSE: AIG) is seeking $40 billion in financing from US Federal Reserve Bank. Market sources believe that AIG can survive for 48-72 hours after a possible S&P rating downgrade. AIG said "everything is on the table"; in other words, the company is offering everything it owns for sale in an effort to stave off a credit downgrade and save its business.
Meanwhile, trading in markets worldwide, the TASE included, is being affected by growing assessments that Federal Reserve Board Chairman Ben S. Bernanke will make another interest rate cut to avoid a recession. Such an interest rate cut, without any change in the euro interest rate, will further widen the dollar's interest differential with other currencies, push the price oil back up, and increase the risk of inflationary pressures with nothing to stop them.
The Banking Index fell 2.5%, driven down by a 2.7% drop by Bank Hapoalim (TASE: POLI; LSE:80OA) and a 3.7% drop by Bank Leumi (TASE: LUMI). Israel Discount Bank (TASE: DSCT) bucked the trend with a 2.7% gain. Bank Hapoalim announced that its exposure to Lehman Brothers totals $109 million.
Elsewhere on the Tel Aviv 25 Index, Israel Chemicals Ltd. (TASE: ICL) rose 1.2% and Oil Refineries Ltd. (TASE:ORL) rose 3.5%, boosting their parent company, Israel Corp. (TASE: ILCO) 0.6%. Delek Group Ltd. (TASE: DLEKG) rose 1.5% and Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) rose 0.9%.
Published by Globes [online], Israel business news - www.globes-online.com - on September 15, 2008
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