Nonresidents unload short-term BoI debt

Residents made a net $300m. in direct investments abroad in March, mainly in the manufacturing and service industries.

By NADAV SHEMER
May 10, 2011 22:37
2 minute read.
shekel and dollar

shekel versus dollar 521. (photo credit: REUTERS)

Nonresident investors sold about $1 billion of makams, or short-term Bank of Israel debt, in March, after net investment of $2.4b. in makams in January and February, the central bank reported Monday.

According to data released by the bank, there were net sales in March of about $1b. in Israeli corporate bonds traded abroad, including $800 million from the maturity of a bond of a pharmaceuticals company and $100m. from the bond of an energy company.

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Despite the drop, foreign investors still hold most of the makams issued by the Bank of Israel. The heavy sale of short-term debt in March continues a trend from the last 18 months, in which foreign investment institutions sold in March, June, September and December, the same months in which they publish their financial reports.

Meanwhile, Israeli residents invested a net $20m. in foreign shares traded abroad in March, a significant drop from previous months, the Bank of Israel reported. The fall comes on the back of decreased investment flow from institutional investors in February and March, in addition to net sale by households of about $270m.

Residents made a net $300m. in direct investments abroad in March, mainly in the manufacturing and service industries. At the same time, Israelis invested a net $30m. in tradeable bonds abroad, with $175m. by institutional investors offset by a large quantity of sales by households.

Also on Monday, the central bank released its report to the public on the discussions between Bank of Israel Governor Stanley Fischer and his colleagues prior to setting the interest rate for May, which it kept at its previous level of 3 percent.

In its announcement, the bank emphasized several points, including: the recent appreciation of the shekel and recent increases in the interest rate are expected to moderate inflation in the coming months; indicators of economic activity support the assessment that rapid expansion of activity and demand continued in the first quarter; and a large number of central banks, primarily in emerging- market economies, are raising the benchmark rate and introducing other contractionary measures.

The issue of rapidly rising housing prices also featured heavily in the discussions, according to the report.

“One participant in the discussion noted that the high demand for houses was in contrast to the moderation of private consumption and the indices of the public mood, so that this development is exceptional,” the report said. “The participants discussed the implications of the increase in housing credit on financial stability, particularly in light of a possible significant drop in house prices in the future, although the probability of that occurring was thought to be slight.

Globes contributed to this report.


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