Israeli stocks soar on global rally

Tel Aviv stocks bounced high Sunday, rising nearly 4% on the matza-thin turnover that characterizes a truncated holiday session. But analysts suggest that the boom on the Tel Aviv Stock Exchange this year may be little more than a correction after the steep decline in previous months, and stress that the macroeconomic situation remains forbidding.

In the last month, the TA-100 index has gained 24%, the TA-25 index has gained 23% and the Real Estate-15 index has advanced by a sharp 45%. The situation on world markets is similar: in the last month, leading indexes have risen by 23% to 35%.

But note that the Real Estate-15 is still 74% off its peak level, achieved in 2007. The Banks-5 index remains 51% below its peak.

Yesterday the benchmark TA-25 index gained 3.5% to end at 783 points and the broader TA-100 index gained 3.9% to 718 points. The Real Estate-15 index added 6.8%, led by Africa Israel Investments. Total turnover was NIS 930 million as the day ended at 14:45. Last year and in 2007, the average daily turnover in stocks and bonds had been around NIS 2 billion.

Market players yesterday ascribed yesterday's rally less to gefilte fish-fueled cheer and more to the uptrend on Wall Street as last week ended, following an upbeat forecast by Wells Fargo. But that American uptrend may prove ephemeral. The world also learned this weekend that in the first half of the budget year, the U.S. deficit mushroomed to nearly a trillion dollars, specifically a record $957 billion.

That's three times the amount in the corresponding period of the previous budget year, as Washington pours money into the finance system and big companies.

Here at home, the financial statements for the fourth quarter and year 2008 were miserable, notes the equity research department of Bank Leumi. "In our opinion, we still aren't seeing the full picture [of misery]," the bank wrote, predicting that the situation of the companies will continue to deteriorate. Yet despite the unhappy figures on jobs and the macroeconomic environment, the Tel Aviv Stock Exchange has been rebounding as though all's well, the bank writes.

Why? Because of surplus liquidity among institutional investors, and absence of alternatives, Leumi suggests. The institutionals - provident and mutual funds, insurance companies and the like - are afraid of losing money on bonds because of the Bank of Israel's recent decision to start buying government bonds.

Sami Babkov, chief executive of Harel Pia, agrees with Leumi: "The gains we've seen in the last month don't attest to the end of the crisis or to a change in direction. They're simply a requisite correction after the sharp losses in recent months," he said. "The biggest obstacle before the conservative investor is volatility, because it raises the probability of making a mistake. The markets remain so volatile that all it takes is one negative announcement for the direction to change."

Meanwhile, the number of Israeli companies in Forbes' list of the 2,000 biggest companies in the world rose to 13, from ten the year before. The newcomers are real estate company Africa Israel, phone company Bezeq, data security company Check Point Software Technologies and real estate company Gazit Globe. Oil Refineries fell from the list this year. Teva Pharmaceutical Industries kept its plans as the largest Israeli company, but fell from 381th place to 346th last year.

Onto the stocks: Shares of Africa Israel leaped nearly 17% yesterday in response to the company's announcement that after a year of negotiations, it's finally selling the Ramat Aviv mall, to the Ofer family company Melisron. Africa Israel Properties has a memorandum of understanding in place with Melisron, pricing the mall at NIS 1.53 billion.

As it continues to divest assets, Delek Real Estate gained 7.3% after saying it had sold La Chatel, a building in Montreal, for NIS 123 million (C$36.7 million). At the end of 2008 La Chatel had been booked at a value of C$37.5 million.

Israel's primary market is reawakening following the publication of the 2008 reports. Food company Strauss Group gained 4.2% yesterday: It reportedly plans to issue bonds based on a shelf prospectus filed in May 2007. The prospectus is in force until May.

Delek Israel fell 7.4% on news from last week that Maalot S&P is placing it on negative credit watch. At present Delek Israel's bonds are graded A+.