Market report / Africa Israel loses 7% after profit warning

Tel Aviv stocks ended flat as a pita for the second day in a row. The session was fairly dull, with total turnover of just NIS 1.1 billion. The TA-25 index closed unchanged at 638 points and the TA-100 index inched up by 0.1%, closing at 576 points.

The Tel Aviv Stock Exchange is closed today for Purim, by the way.

Local share prices had been hovering a bit below the flatline until shortly before closing. Since America adopted daylight savings time, it was just 3:30 P.M. in Tel Aviv when Wall Street opened. Shortly before the local session ended, the leading indices in New York were up about 1%, which helped boost share prices in Tel Aviv toward positive territory.

Meanwhile, the bad macroeconomic news continues to roll in. The World Bank suggests that the developing economies face a combined deficit of $700 billion for imports and debt payments.

Nobel laureate Myron Scholes (yes, the partner of Fischer Black in the famous formula for calculating the value of stock options) said at a New York University panel that regulators should blow up or burn down the market for derivatives to help solve the financial crisis, and then start everything over. The markets have seized up and aren't providing the signals needed to price securities properly, he explained.

Also in the U.S., the labor market lost 651,000 jobs in February, which is the worst figure since 1949.

Moving onto Europe, Jean-Claude Trichet, president of the European Central Bank, commented last Thursday that the bank may lower euro-bloc interest rates below the present historic low of 1.5%, to battle the worsening recession.

Back to the States, where uber-investor Warren Buffett said that the economy has fallen off a cliff and is pretty close to the worst-case scenario he could imagine. However, things would have been even worse if not for the U.S. Federal Reserve and U.S. treasury taking extraordinary steps, Buffett added.

Over here, some good news: Foreign investors have been coming back. Bank of Israel figures show that during January 2009, foreign residents put $476 million into Israeli securities, of which $331 million was in bonds and the rest in stocks.

Onto the stocks! The story of the day was naturally Lev Leviev's real-estate giant Africa Israel, which tumbled 7.2% the day after advising investors that it had lost NIS 2.7 billion in the fourth quarter of 2008. Its loss for the year is about NIS 4.5 billion because of the shrinking value of properties it owns around the world. Altogether its properties lost about NIS 1.3 billion in value during the year, Africa Israel said.

Then there's Kamada, a drug development company that gained 7.1% after reporting an agreement with the Health Ministry to develop and produce an antidote to snake venom. Kamada will be setting up production means with Health Ministry money, NIS 20 million for the project, of which NIS 1.7 million is to be paid up front. The rest will be forthcoming before year-end 2010.

Makhteshim Agan stock ended flat. The agrochemicals company is scheduled to publish its financial statements tomorrow for the fourth quarter of 2008 and the year. Harel Finance equity research chief Amir Adar thinks the Israeli company will have underperformed its sector because of its limited presence in the U.S., and because of its pickiness in Brazil. To wit, Makhteshim Agan has decided to forgo certain clients with dubious payment ability.