There has been something strange in the Israeli capital market lately. Since reaching a post-crisis high of 1,150.23 points on January 19, the S&P 500 fell by over 8% to a recent low of 1,056.74 points on February 8, a drop of over 100 points in 14 trading days. The S&P 500 fell 0.22% yesterday to 1,068.13 points.
In contrast, the Tel Aviv 25 Index has been making its own way. It fell over 3% from 1,156.38 points on January 19 to a recent low of 1,118.61 points, a much better performance compared with the S&P 500. The Tel Aviv 25 Index rose 0.54% yesterday to 1,135.16 points.
Germany's DAX, which Israeli traders like using for comparative purposes, also shows a clear picture. It has fallen over 7% from 5,976.48 points on January 19 to 5,536.37 points yesterday.
Many Tel Aviv Stock Exchange (TASE) traders and investors are undoubtedly asking themselves why the Tel Aviv 25 Index is divorced from its international peers. Representatives of key foreign investors told ''Globes'' that the main reason for the disengagement is apparently activity by two hedge funds, among the largest of mid-sized funds, one US and the other European, which have decided to divert funds to Israel and increase their positions on the TASE. One of the reasons for this is the relative strength of the Israeli economy during the global crisis, and its relatively quick exit from recession compared with other Western economies.
Each of the two hedge funds are investing $100 million a day in TASE-listed securities. The figure is about one-third of the daily active investment in Tel Aviv 25 shares, and the two funds will probably continue this activity in the upcoming trading days. The effect is clear: support for the Tel Aviv 25 Index in the short and medium term.
The two funds are buying shares in Tel Aviv, essentially without regard to market developments, and in so doing are providing near to medium term support for the TASE.
A top representative of Goldman Sachs, who advises the two funds mentioned above, declined to respond yesterday evening to questions by "Globes", saying only, "The fund does not manage its investment policy discussions in the media. Israel was, and continues to be, a legitimate target for investment by the portfolio."
Published by Globes [online], Israel business news - www.globes-online.com - on February 11, 2010
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