Leumi: Market rally is real

Bank Hapoalim: Even when interest rates begin to climb, there will be room for gains on the TASE.

Bank Leumi is continuing its bullish view of the Tel Aviv Stock Exchange (TASE), after switching from a bearish outlook last week, and advises investors to increase exposure to stocks, even after the recent rises. The Tel Aviv 25 Index rose 4.7% this week and the Banking Index rose 5.4%. TASE indices achieved double-digit gains in July, and the banks' research departments do not think that the rally is over.

In its weekly capital market report, Bank Leumi says, "In the short term, we expect the trend to be positive, especially in view of the many signs that the economic situation has stabilized, and the low returns expected for bonds."

The bank notes several factors that suggest that the stock market rally is "real". They include the appreciating shekel that is accompanying the rise in stock prices, and the large trading volumes that are not characteristic of summer. The bank also cites the decline in the standard deviation reflected in Tel Aviv 25 options, which rose more than 25% this week "both due to the rise in risk level and the closing of some open positions because of the surge in stock prices."

Nonetheless, Bank Leumi recommends to continue buying stocks. "It is worthwhile to gradually increase the equity component of investment portfolios," it states.

Bank Hapoalim also believes that the TASE rally will continue, but it cautions against profit taking in the short term, "especially in view of the sharp and rapid rises in the past few weeks".

The bank also notes that the Bank of Israel kept the interest rate unchanged this week, and that some analysts expect an interest rate hike later this year or in early 2010 at the latest. An interest rate hike usually weighs on the stock market, but Bank Hapoalim says that even when interest rates begin to climb, there will be room for gains on the TASE.

Published by Globes [online], Israel business news - www.globes-online.com - on July 30, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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