All the participants in the "Globes" Big Money survey for 2013 predict that the Tel Aviv Stock Exchange (TASE) rally will continue and that the consensus is for a 13% gain by Tel Aviv 25 Index for the year. A quarter of the 20 investment houses participating in the survey predict that that the index will rise by 18% to 1,400 points. No participant believes that the index will fall this year.
Despite a stormy year, the TASE rose in 2012, after falling in 2011. The Tel Aviv 25 Index rose by 8% in 2012, partly correcting for its 18% loss in 2011. But the average daily turnover was down by 38%, and the issue of debt settlements is still on the table, and the global economic uncertainty continues.
The respondents also predict that the S&P 500 Index will rise by an average of 10% in 2013, and a quarter of the respondents predict that it will rise by 14% to 1,600 points. Two respondents believe that the index will remain unchanged.
90% of respondents advise investing in stocks in 2013, compared with 36% of respondents who advised avoiding stocks in 2012. The trend for corporate bonds is reverse: the proportion of respondents who advised investing in corporate bonds has fallen from 84% in 2012 to 50% in 2013. Interestingly, although both stock and bond instruments have been rising strongly lately, investment houses are undeterred, and predict upsides for both.
12 investment houses recommend oil and gas companies as their stock picks for 2013. The sector was the pick of one third of the 20 investment houses in the 2012 survey. The top three stock picks in the sector mentioned by the investment houses recommending it are Avner Oil and Gas LP (TASE: AVNR.L), cited by 20% of the recommendations, followed by Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) and Ratio Oil Exploration (1992) LP (TASE:RATI.L), both cited by 15% of the recommendations.
The respondents also favor the banks, mentioned by half of the investment houses, despite a 20% rise by the Banking Index in 2012. The investment houses apparently believe that there is still an upside in the sector, after the 36% plunge in 2011. In the 2013 survey, only four banks are recommended. Bank Hapoalim (TASE: POLI) and Israel Discount Bank (TASE: DSCT) are the stock picks of 15% of the investment houses, while Bank Leumi (TASE: LUMI) and Mizrahi Tefahot Bank (TASE:MZTF) were the stock picks of one investment house.
As in 2012, investment houses advise against exposure to the real estate, telecommunications, and food sectors. Shares that are not recommended include Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), which fell 9% in 2012, and Osem Investments Ltd. (TASE: OSEM), which rose 14%.
75% of the respondents warn against investing in government bonds, and 25% advise investing in them. Last week, the Bank of Israel cut the interest rate for January by a further 25 basis points to 1.75%, compared with 2.75% in January 2012. The interest rate cut may be the reason for the investment houses' aversion to government bonds, given that they predict that the average interest rate in 2013 will be 2%. The fall in bond yields is driving investors to seek assets with higher yields, strengthening the preference for stocks and corporate bonds.
The investment houses predict that the average shekel-dollar exchange rate will be NIS 3.60/$ in 2013, 2% less than yesterday's representative rate set by the Bank of Israel of NIS 3.733/$. Half of the respondents predict that the shekel will strengthen against the dollar, and most set an exchange rate of NIS 3.50/$, but a fifth of the respondents believe the opposite, and that the exchange rate will rise to NIS 3.90/$, a 5% rise over the current representative rate.
The investment houses' consensus is for 2% inflation in 2013 and 3.1% GDP growth, above the Bank of Israel estimate of 2.8% growth (excluding natural gas).
Published by Globes [online], Israel business news - www.globes-online.com - on January 1, 2013
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