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Tel Aviv stocks cut steep early losses to end sharply lower yesterday - yet the overall performance of local shares was better than had been expected, given the meltdown of world markets during the protracted break enforced by Yom Kippur.

Traders ascribed the afternoon rebound, albeit to well below the flatline, to the relative moderation of drops on Wall Street last Friday.

After a tense wait, the session opened 45 minutes late at 11:15 A.M. after automatic safeguards kicked in at the Tel Aviv Stock Exchange. When the leading TA-25 index begins the day with a loss greater than 8%, trading is automatically suspended for 45 minutes to give investors a chance to think through their moves. However, the hiatus had little effect on morning trading, at least insofar as halting the rout was concerned.

The TelTech-15 index, which is heavy with Israeli shares dual-listed on Wall Street, and the Real Estate-15 index began with losses of more than 16%, brought low in a selloff fueled by fears that large-cap companies could implode as sources of credit evaporate. As of mid-day the Real Estate-15 index was losing 12.3% and the Tel Tech-15 index was down 13%.

But by closing, the Real Estate-15 index had lost a relatively less painful 8.9% to 236 points. The Tel Tech-15 index lost nearly 12% to 150 points.

The benchmark TA-25 index, consisting of the 25 largest-cap stocks on the TASE, fell "only" 3.8% to 767 points. The Tel Aviv-100 index, which has the 100 largest-cap stocks on the exchange, had lost 4.6% to 684 points, compared with a mid-day retreat of 7.1% - and a starting plunge of 10%.

Among the hardest-hit sectors yesterday were technology and real estate. The real-estate index is full of companies associated with heavy borrowing. They typically finance construction projects and acquisitions through debt, and now, as the international money markets seize up, investors are terrified that the companies don't have the resources to repay debt coming due, and won't be able to borrow more to recycle their liabilities. That said, Lev Leviev's Africa Israel actually recovered, closing nearly 2% higher, but the rest of the real-estate pack stayed in the red. Moti Zisser's Elbit Imaging tumbled 15%, Kardan NV lost nearly 18%, and Gazit Globe retreated by 11%.

The Finance-15 index lost "just" 3.7%, perhaps because Israel's economic leaders keep driving home the point that unlike many of their peers abroad, the local banks are stable. The Banks-5 index lost a mere 1.9%.

DS Apex, the only brokerage on the Finance-15 index, lost 10.3%. While the banks were relatively resilient.

Typically defensive stocks include food and telecoms, on the grounds that people have to eat and will talk. Yesterday both were in the doghouse with almost all the other stocks: Partner Communications clawed back some ground, ending down 2.7% compared with a mid-day loss of 4.7%. Cellcom fell by 3.1%.

Moving on to food manufacturers, Osem lost 3.2%, and Strauss almost made it back to the flatline, losing 0.7%.

Drug company Teva, quite the favorite among investors, tumbled by 7.4%, again an improvement compared with its morning drop of 10%.

Yields on bonds associated with Israel's biggest tycoons shot sky-high in the morning, deep into junk status, but that surge also moderated as the day wore on. The Tel Bond-20 index ended above water, after starting with a dive of 3% and then some. The hardest-hit were the big real estate companies owned by "the tycoons," Lev Leviev, Yitzhak Tshuva, Shari Arison and Eliezer Fishman. But by mid-day the trend was mixed. Africa Israel B15 bonds stood out with a closing gain of more than 8%, which reduced their yield to a (still-junk) level of 25.7%.