Subscribe to Print Edition | Fri., October 10, 2008 Tishrei 11, 5769 | | Israel Time: 01:41 (EST+7) web haaretz.com   Back to Homepage Haaretz Toolbar Diplomacy Defense Jewish World Opinion National Print Edition Car Rental Books Haaretz Magazine Business Real Estate Easy Start Travel Week's End Anglo File

Rate cut lifts real estate stocks 20% By Tal Levy Banks, blue chips jump but ICL falls Tel Aviv stocks were spurred north yesterday by the Bank of Israel's surprise interest rate cut, a good three weeks before its next scheduled monetary announcement. Tel Aviv's investors awoke yesterday hoping that the uptick on Wall Street and on European markets would lift Israeli shares, at least a little. But nobody could have predicted the dramatic events of late afternoon yesterday, when Bank of Israel Governor Stanley Fischer suddenly slashed lending rates by half a percent to 3.75%. Advertisement The rate cut is good for the banks, borrowers and the battered real estate sector. Investors responded by sending finance-sector stocks and the Real Estate-15 index soaring almost 20% on heavy turnover. Total turnover was rather heavier than usual, at NIS 2.4 billion. At the end of the day the TA-25 index gained 3.9% to 798 points, though the index of blue chips is still down 6% from last Thursday. The TA-100 index climbed by 4.6% to 761 points, though it too is down 6% for the week. The TelTech-15 index, which is heavy with dual-listed stocks traded on Nasdaq, jumped 6.8% yesterday. Investors had only yesterday to respond to the Bank of Israel's totally unexpected move, and to the overseas developments of the day before. The Tel Aviv Stock Exchange will remain closed until next Sunday, because of Yom Kippur, followed by the weekend. "The governor figured, better an ounce of prevention than a pound of cure," said David Keshet, mutual funds manager at the Tel Aviv-based brokerage DS Apex, predicting that the rate cut will increase liquidity in the marketplace, making it easier for businesses to borrow and roll over debt. Rate cuts typically lift share prices because the lower interest is, the less people make on safe-haven vehicles like bank deposits. Hungry for returns, they then tend to invest more in riskier financial instruments such as stocks. However, Keshet warns that the sense of relief will be short-term, and yesterday's powerful updraft may not be sustained. Indeed, in less positive news for investors, the Swiss investment bank UBS yesterday lowered its growth forecast for Israeli GDP in 2009 to 2.2%, from 3.1%, as a by-effect of the global slide into recession. As for the stocks: Shares of the big banks gained about 10% as investors expressed their at least short-term relief. Bank Leumi gained nearly 5% on heavy turnover of NIS 152 million, and shares of Bank Hapoalim shot up by 7.5% on a volume of NIS 124 million. Mizrahi-Tefahot swanned in the spotlight, rising by 11.2%, and shares of Discount Bank did not shame, with a leap of more than 6%. Insurance companies also did well: Menorah-Mivtachim Holdings gained almost 12.5%, though Migdal had to settle for rising by "only" 2.7%. Clal Insurance gained 6.8%. Moving on to the bouncing real estate sector, the performance was remarkable. The Real Estate-15 index had lost 40% in the last few weeks, but yesterday, Lev Leviev's vehicle Africa Israel shot up 12%. Just yesterday Leviev told investors that his company is in terrific condition - see the report on the right. Moti Zisser's customer Elbit Imaging skyrocketed with a 15% gain and Chaim Katzman's Gazit Globe gained nearly 9%. Real estate development and investment companies had been particularly hard hit of late. They are perceived as being heavy borrowers and had issued large amounts of debt during the boom years. Many of them are international operators and therefore, they were directly affected by the meltdown in America's property market, which turned into a full-blown credit crunch. Bonds of respected companies such as Delek Real Estate, run by Ilik Rozanski, and Africa Israel started trading at junk levels as investors began to worry whether they could return debt. One stock that didn't join yesterday's party was potash producer Israel Chemicals. It lost 1.1% on the highest turnover of the day - NIS 366 million. Fertilizer stocks the world wide have been losing ground as commodity prices fall back. The assumption is that as farmers get less for their crops, they can't afford to buy as much fertilizer or crop protection chemicals. Apropos of which, crop protection chemicals maker Makhteshim Agan edged up by 0.3% on turnover of NIS 48 million. Bookmark to del.icio.us   A man of peace Vatican defends wartime pope Pius XII against charge he turned blind eye to Holocaust. Feminine features An Iranian motor company unveils plans to design cars specifically tailored to women.

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