Local economy should withstand the shock, businessmen say

Israeli investors agree that psychology rather than economics stands behind the fall.

currency 88 shekel (photo credit: )
currency 88 shekel
(photo credit: )
As stock markets around the world continued to tumble, bringing the Tel Aviv Stock Exchange (TASE) down with them, Israeli investors agreed that psychology rather than economics stood behind the fall, but varied in their forecasts for the local economy. The TASE awoke to crashes in the Asian stock exchange, and initially responded with sharp decreases of its own, before bouncing back to moderate share decreases. The TA-25 Index of shares fell by 3.4% in the morning, before bouncing back to 1.8% down by midday. The TA-100 Index fell by 3.8%, but also recovered and was down 2.2% by noon. The TASE continued the recovery, ending the day with moderate falls - the TA-25 fell 1.36% and the TA-100 fell 1.61%. The Israeli economy was sound, and the TASE would not fall to recession-inducing levels, Alumot Investment House CEO Shai Sharon told The Jerusalem Post Tuesday. "I don't see the Israeli economy going into a recession, or the TASE reaching rates that will cause one," he said. "I have learned an important thing - the economy wins. The economic parameters in Israel are strong in terms of growth, employment and inflation, despite fears that the latter will raise its head." Sharon said the current drops presented a unique opportunity for investors to selectively purchase shares in the "solid" retail sector, such as supermarkets and telecommunications, "things we are all buying and using." He said psychology stood behind most of the falls on the TASE, adding, "At some point the psychology ends and economics takes over. The bottom line is that we are pretty optimistic." The subprime lending crisis in the US, which caused the current drop, had triggered a psychological domino effect, Co-Op supermarket chain CEO Rami Mendel told the Post Tuesday. He advised Israeli investors to "do nothing, sit on the side and wait to see what happens." Damage to the Israeli economy would be "unavoidable," Mendel said, adding that the economy "can't be disconnected from an international crisis." Public companies, liquid finances, foreign investors and local consumers' ability to purchase would be affected the most, he said. Consumers would be limited in buying apartments, cars, furniture and holidays, he added. In a press statement, Shimon Shuval, CEO of the Israeli branch of ISS (a global provider of restaurant and catering, hygiene and office services) warned that the stock market falls could bring about a recession. "All companies and businesses could be affected for a considerable period," he said, "and companies like ISS, which employs thousands, could be affected by this phenomenon." But Shuval said the Israeli economy "had strength - and has been proportionally less affected than Asian or European markets." "When America sneezes, we can catch a lung infection," Ophir Tours Group chairman Boaz Waxman said, adding, "This is a short crisis, and we see big changes ahead of Pessah; many of the problems will be solved by then." "The Americans will know how to get out of the crisis," he said. "And we - if we got over the Lebanon War in the summer of 2006 - will have no problems getting over the crisis of winter 2008." C-Hotels CEO Shauli Dor also said the crisis would be over by Pessah. "The damage to Jewish tourism, which peaks during Pessah, will be minimal," he said. Shmuel Birnaum, general manager of the Mishav real estate company, said his sector would not be harmed by the crisis, "especially in the center of the country, despite a certain decrease in the public's savings as a result of a fall in the value of investments."