Tel Aviv Stocks Hit Record Closing High As Israel Plays Catch-Up

Israel’s blue-chip share index hit a record closing high on Wednesday, having lagged many of its counterparts across the world for nearly three years as political instability clouded investor perceptions towards the Middle East.

The Tel Aviv 25 index rose 0.7 percent to close at 1,344.34 points, surpassing the prior record of 1,341.89 hit in April 2011 and only marginally off its all-time high. The broader TA-100 gained 0.7 percent to 1,213.26 points, about 40 points shy of its record.

That took the blue-chip index’s gains so far this year beyond 13 percent, though traders said prospects of a further rally will depend in part on how international talks with Iran over its nuclear programme progress.

The index gained 9.2 percent in 2012 and fell 18.2 percent in 2011, when the Arab Spring revolts flared in neighbouring Egypt and Syria.

By comparison, Europe’s FTSEurofirst 300 index is up close to 15 percent this year after a 13.2 percent rise in 2012 and 10.7 percent decline in 2011 – itself eclipsed by Wall Street’s Nasdaq Composite.

“The geopolitical issues have receded a bit,” said Zach Herzog, head of international sales at Psagot Securities in Tel Aviv. “The recent strength in the market is catching up to global equities.”

The local market this year has largely been driven by gas exploration  companies, which comprise some 10 percent of the TA-25 index. Delek Drilling and Avner Oil Exploration , for instance, are up nearly 30 percent this year.

In March, the large Tamar well off Israel’s Mediterranean coast began production, while the larger Leviathan site nearby is set to come online in another few years and much of its gas reserves will be for export.

Telecoms companies have also helped, with gains of around 50 percent after steep losses the prior two years following regulatory changes and the addition of host of newer companies that sparked a mobile phone price war.

Volumes in Tel Aviv remain fairly low, however, averaging around 1 billion shekels a day this year – 47 percent of the level in 2010.

Most of the gains have come from local investors, mostly institutions, which comprise about 85 percent of activity.

A large chunk of foreign investment left Israel after MSCI upgraded Israel to a developed market in mid-2010, leading to an exodus of passive money from emerging market funds.

Foreign participation has increased of late, though, partly due to a strong shekel.

Source : Reuters