Market Report / Budget cuts, tax hikes send mixed message for investors
Banks climb 1.6% on extremely thin trading.
Trading on the Tel Aviv Stock Exchange was mixed yesterday after modest declines for most of the day against the backdrop of concerns over planned government spending cuts.
The Tel Aviv-25 index ended the day 0.1% higher at 1,110 points, while the broader Tel Aviv-100 index slumped by 0.1% to 999 points. The Banks-5 index gained 1.6% for the day while the Real Estate-15 closed the day 0.1% higher.
The Insurance Index, representing a segment that led declines early in the day, slumped by 0.8%, while the Tel Bond indices traded substantially unchanged. Trading volume was an extremely light NIS 675.2 million.
The treasury's announcement that it is proceeding without hesitation on preparing the 2013 state budget means the cabinet will soon be facing tough decisions on how to pass required cuts of NIS 12 billion to NIS 14 billion, despite the spending obligations the government has assumed as well as declining tax receipts. Trading in government bonds was mixed, following declines on Tuesday of up to 1.2%.External events send bonds falling
"The fall in bond prices and the increase in yields is the result of external rather than local factors," according to Clal Finance macroeconomist Amir Kahanovich. In a daily survey for investors, he attributed the decline in Israeli government bonds to events beyond Israel's borders and said the higher yields on the bonds were in keeping with higher yields abroad due to lower demand for savings and increased demand for loans. This, he said, was apparently the result of increased economic optimism. "This explanation is also in keeping with the recent gains in the share market," Kahanovich added.
n the ongoing drama over the future of the euro zone, Italian Prime Minister Mario Monti has taken the gloves off in his fight to save Italy from disaster in the continent's debt crisis, daring to stand up to European paymaster Germany in a way unthinkable a few months back.
His change of attitude is driven by increasing Italian exasperation with repeated delays in formulating an effective response to a crisis on bond markets, delays that have put Spain and Italy in the front line against a threat to the euro's existence and perhaps the whole European Union's as well.
Monti is trying to pressure German Chancellor Angela Merkel into agreeing to a European shield against high borrowing costs that are crippling Madrid and Rome, and that he believes threaten the survival of the euro if the two countries lose access to markets. But his outspoken tactics have already provoked a backlash in Germany and risk becoming counter-productive.
Back in Israel, Retalix again beat earnings forecasts for the second quarter of the year, reporting $3.9 million in earnings, or 15 cents a share, for a 37% increase over earnings for the second quarter of last year.
The average forecast among analysts was 13 cents a share. Retalix shares gained 0.4% for the day yesterday in Tel Aviv, closing at NIS 83.31. Shares of Babylon, the translation software firm, plunged 5.7% in trading yesterday amid volume of NIS 41.2 million, the second highest for the day's trading. The IDB group continues to spark investor interest after its shares of its Discount Investment subsidiary rose 23% on Tuesday. Yesterday Discount Investment shares declined, however, by 9.1%.
Delek Real Estate securities traded against the background of opposition by the representatives of Series Dalet bondholders to a proposed debt arrangement. The representatives came out in favor of dissolution of the company instead. In other developments on that front, Tel Aviv District Court Judge Varda Alshech required that the company as well as bondholder representatives present investors with their options in plain language regarding the implications of a debt arrangement versus dissolution. Delek Real Estate shares closed 2.5% higher in trading yesterday.
Tao Tsuot, which is also in the middle of efforts to come to a debt arrangement, announced yesterday that the trustee handling the company's stay of proceedings had received an offer from a third party for a 75% share of the company's interest in land in Romania for NIS 2 million. Tao Tsuot is controlled by Ilan Ben-Dov.
Delek U.S. Holdings, which is traded on the New York Stock Exchange, announced second quarter results and reported net profits for the quarter of $67.8 million, which was 9.2% higher than the quarter last year and the highest quarterly profits in the company's history.
With reporting from Reuters.