The Tel Aviv Stock Exchange (TASE) fell today. The Tel Aviv 25 index closed down 2.10% at 363.94 points, the Tel Aviv 100 index fell 1.83% to 352.93 points and the Tel-Tech 15 index lost 2.27% to 188.46 points. Turnover totaled NIS 134 million.
On a day when a bus was blown up in the north, a terrorist opened fire in Jerusalem, Israel Defense Forces killed a terrorist in the Gaza Strip, and the press featured a new threat – biological terrorism, there is no need to ask why the stock market plunged. When you add the sharp decline on Wall Street in recent days and the gloomy atmosphere on capital markets around the world, you get a guaranteed formula for red ink on the largest stock exchange in the Middle East.
The shekel, which strengthened to NIS 4.689/$ last Wednesday, today traded around NIS 4.74/$ in options trading. Foreign currency market traders expect that the new wave of terrorism and concern over the beginning of a US military offensive against Iraq will intensify the short-term pressure on the shekel. They believe, however, that the interest rate gap will prevent the shekel from declining much further. Predictions are that the exchange rate will fluctuate in the NIS 4.65-4.74/$ range in the near future. p>The dollar once again weakened globally at the end of last week, following negative macroeconomic statistics published in the US. The euro rose again to $0.99/€, while the Japanese yen traded around ¥1.19/$.
By the end of the day, the TASE was down quite sharply in all indices.
Teva, which opened the day on a negative 0.9% arbitrage gap, today fell 2.5% on the day’s highest trading volume. A 13.3% surge over the past two weeks thereby came to an end. The market had expected excellent second quarter reports from the company, and Teva rose to the occasion. The company’s net profit was $91.9 million, compared with the analysts’ forecasts of only $85-87 million.
Hard times for the bank shares
Another share getting attention for the wrong reason was Bank Leumi. This morning, the cabinet approved the recommendations of the Marani committee, which discussed the process of privatizing the state’s 41.7% holding in Israel’s second largest bank. The committee recommended that the state sell 6-7% of the shares on the Tel Aviv Stock Exchange, with the state retaining at least 34.7% of the bank.
After the first stage is completed, the state will continue selling its Bank Leumi stake, after the necessary legislation is passed. According to predictions, if everything goes smoothly, the bank will be completely privatized within six months.
The sales of the state shares will boost the number of shares in circulation. It will add to the supply of shares, and therefore lower the share price. On Thursday, we saw the initial market reaction to the committee recommendations, with the share dropping 3.9%. The negative pressure continued today, with the share sliding another 1.3% on a rather lively turnover.
The entire banking sector took it on the chin today from the Supervisor of Banks’ annual report, which was published this morning. The report paints a gloomy picture of Israeli banking, with profitability at a low. The return on capital was only 4.2% in the first quarter, only slightly above the return on risk-free government bonds. At the same time, the banks' capital adequacy ratio is approaching the 9% minimum permitted by Bank of Israel regulations, making it difficult for the banks to expand their credit in the coming months.
The other bank shares were down sharply today, with Bank Hapoalim off 3.1%, Israel Discount Bank losing 2.4%, and United Mizrahi Bank down 2%.
MA (Makhteshim Agan) Industries, on the other hand, which had lost 8% in three days, gained 1.6% on a large NIS 11.5 million turnover, following a report that the company's Rimon product is expected to fast-track approval for distribution in the US. The share corrected its sharp fall in recent days, following the collapse of the Brazilian real, and brought a little sunlight into the day’s hailstorm.
Dor Chemicals climbed 2.8% today on a lively turnover, while Polar Investments, which holds 11% of Dor Chemicals, posted a 1.6% rise on a small turnover.
Published by Globes [online] - www.globes.co.il - on August 4, 2002