Market Report / Insurance shares pull up TA-25
The benchmark TA-25 index rose 1.0% on Tuesday, to 1,109 points, while the broader TA-100 index climbed 1.2%, to 999 points.
The Tel Aviv stock exchange closed higher on Tuesday, taking the lead from trade on Wall Street on Monday and on Asian markets on Tuesday. Investors both here and abroad may have been encouraged by Germany's words of support on Monday for European Central Bank President Mario Draghi's plan to buy up Spanish and Italian government bonds.
The benchmark TA-25 index rose 1.0% on Tuesday, to 1,109 points, while the broader TA-100 index climbed 1.2%, to 999 points. The Banks-5 index gained 1.3% after dipping 0.5% in the morning. The Real Estate-15 index gained 0.26% on the day. Overall trading volume was a thin NIS 751 million.
Spanish and Italian short-term government bond yields rose Tuesday as caution took over after a strong rally fueled by the prospect of the ECB buying the two countries' debt. The central bank said last week it may resume purchasing bonds, which has given relief to the governments struggling most in the euro zone's debt crisis.
But investors are not yet fully convinced ECB intervention would succeed in insulating Spain and Italy in the debt crisis and worries remain over the barriers that must be overcome before the ECB can step in. The bailout fund, which the ECB wants countries to tap before it buys their bonds, is not yet functional, awaiting among other things a German Constitutional Court ruling on it on Sept 12.
Locally insurance stocks showed impressive gains on Tuesday; the Insurance index rose 4.4%, led by Menora with a 5.7% gain, Phoenix which climbed 4.8%, Clal Insurance, which spiked 4.9% and Harel, which gained 4.5%. These upturns were seen as a market correction after declines in industry stocks in the past month.
EZ does it
Other stock standouts were dual-listed EZchip Semiconductor, which jumped 7% on the TASE Tuesday after rising 5.5% on Wall Street the previous day, and Teva Pharmaceutical Industries, which gained nearly 4.6% on expectations that a European recovery would help the company's bottom line.
The IDB group continued to attract interest. Shares of the group's Discount Investment Corporation soared 23%. The company's bonds rose by 5% to 6%. The gains came after the issue of second-quarter financial reports for the Super-Sol supermarket chain indicating that the declines in profitability had bottomed out, as well as reports that Super-Sol was considering splitting its real estate operations from its retailing activities. Nonetheless Discount Investment's bonds are still trading at high yields of 13% to 20%, reflecting continued concern over its ability to meet its obligations.
Discount Investment's parent company, IDB Holding, rose 4.4% on Tuesday, trading at close to a NIS 900 million market cap. Controlling shareholder Nochi Dankner bought another NIS 1.4 million in the company's shares off the market floor, following purchases of tens of millions of shekels of IDB Holding shares in recent months.
Elad Kraus of Harel Finance said that because of the company's high level of debt investors are treating Discount Investment Corp. shares as if they are an "option" on the shares of subsidiary firms Cellcom, Super-Sol, Koor Industries and Property and Building.
"Gains in one of the subsidiaries will inevitably bring a rise in Discount Investment [shares]," Kraus said. But, he warned, Discount's share price is highly sensitive to what happens at its subsidiaries and carries risk of volatility.
The Israel Securities Authority on Tuesday intervened in the debt rescheduling plans of Yosef Maiman's Ampal-American Israel Corporation. The agency gave the company one week to make public information that it had provided to the Entropy consulting firm and voided Tuesday's vote on the debt restructuring agreement (see story on page 11).
In other local news Bank Hapoalim has cut its growth outlook for Israel for 2013 to 2.5%, from 4.8% for 2011 and 2.8% for 2012. "It's essential that the government provides a realistic forecast for the expected slowing of economic growth when it prepares the 2013 budget," Hapoalim chief economist Leo Leiderman said Tuesday.
With reporting from Reuters.