An electronic board displaying market data is seen at the entrance of the Tel Aviv Stock Exchange, in Tel Aviv, Israel January 29, 2017..
(photo credit: BAZ RATNER/REUTERS)
The Tel Aviv Stock Exchange opened with further losses on Tuesday morning, as market uncertainty continued to reflect major declines on Wall Street.
Despite most global markets being closed Tuesday due to the Christmas holiday, it's business as usual in Tel Aviv where both the Tel Aviv-125 index and Tel Aviv-35 index slumped by more than 2% in morning trading.
Stocks on the Tel Aviv-125 index fell 2.07% on Monday after plunging by 4.5% on Sunday, its worst one-day decline since August 7, 2011. The blue-chip Tel Aviv-35 slid 2.06% after plummeting 4.9% on Sunday.
Despite brief gains for many companies following the opening bell, the most significant losses on Monday were suffered by Migdal Insurance (6.55%), Summit Real Estate Holdings (5.52%) and Clal Insurance Enterprises Holdings (4.94%).
Newly-installed Bank of Israel governor Prof. Amir Yaron emphasized Monday that the economy is in strong shape, but the stock exchange has been impacted by a bruising month for US markets – triggered by concerns over a partial federal government shutdown, the US-China trade dispute and interest rate hikes – that has put the S&P 500 on pace for its biggest monthly percentage decline since 2008 and its worst December since the Great Depression.
“The Israeli economy and financial system are resilient and stable,” said Yaron, speaking at his appointment ceremony at the President’s Residence.
“But the markets’ volatility and declines in recent months, the possible end of the current business cycle and the negative developments in world trade emphasize the importance of responsible fiscal conduct,” he said.
“I cannot tell anyone who holds shares whether to sell or to stay,” said Prime Minister Benjamin Netanyahu, addressing the recent slump. “I will say only one thing: We will look after the stability of the Israeli economy, one way or another.”
As financial analysts predict that the market downturn could last months, they warn that the primary risks currently facing the Israeli market are large-scale mutual fund redemptions and the withdrawal of corporate bond investments.
“There has been a huge amount of money entering this investment vehicle in the last few years,” Alex Zabezhinsky, chief economist at Meitav Dash investment house, told The Jerusalem Post.
“Here we are talking about the general public and the volatile nature of these investments. Investors can escape fast and the market is not so liquid that somebody will simply buy these bonds instead,” said Zabezhinsky.
Analysts speak of some mutual fund investors as “weak hands,” referring to individuals who quickly withdraw investments upon receiving negative forecasts or witnessing breaks in traditional trading patterns.
“We don’t have major economic problems, rather what we’re witnessing is a reflection of the global market,” Zabezhinsky added. “The Israeli stock market has been one of the strongest markets in the world since the beginning of the year.”
While Israeli investors may be reassured by the strength of the local economy, their American counterparts are likely to experience a restless Christmas holiday, commencing when Wall Street closed early on Monday afternoon.
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