As the political drama unfolded in the Prime Minister's Office in Jerusalem, a different one was taking place on Tel Aviv's financial markets. Yesterday morning's headlines quoting Prime Minister Ariel Sharon saying the time had come to divide the land, added to the strength the shekel gained on Friday, prepared the stock exchange for a positive reaction. Indeed, the shekel continued to trek northward and turnover was also particularly high, at NIS 700 million. Leading indices ended the day up 7 percent, while shekel-denominated bonds gained 2.5 percent. The Maof-25 blue chip index closed on 407 points, an amazingly strong 7.2 percent gain.
There is no currency trading on Sundays but the exchange rate reflected in shekel-dollar option trading showed the market expecting the shekel to keep climbing and trade against the dollar at NIS 4.438 tomorrow.
Even market old hands have a hard time remembering a day like yesterday with such strong gains. Some note a day in October 1997 when the market climbed 7.4 percent, but it had fallen by a similar percent the previous day. There was also a huge leap after capital gains tax was canceled in 1994.
Stock exchange director Saul Bronfeld traditionally associates strong gains on the exchange with progress in the political arena, saying in the past "Give me peace and I'll give you a good stock exchange."
A combination of factors led to yesterday's positive trend, but it appears the central booster was the historic cabinet decision in favor of the road map. Market players also mention the Knesset Finance Committee approval of the economic austerity plan, specifically the pension sector reform that will substantially boost bond market tradability.
Billions of shekels a year will be redirected from the designated bonds to negotiable government bonds. The shekel strength at the end of last week does stem from political and economic events, but also boosted trade in stocks and bonds.
The stock exchange gain came after a turn for the worse at the beginning of last week, as it appeared the economic plan was dissolving and another wave of terror was gaining momentum.
The failures of the Sharon meeting with Palestinian Prime Minister Mahmoud Abbas and U.S. Secretary of State Colin Powell's visit to the region.
Traders also explained that the markets were influenced by a massive "short squeeze". Investors who were caught short yesterday by the steep gains, were forced to buy shares at any price in order to close their positions.
State-run phone company Bezeq (TASE: BZEQ ) announced its results at the end of last week. The company had a net profit of NIS 69 million, down 40 percent from the same quarter last year. In the previous quarter Bezeq had huge losses of NIS 792 million for writing down the value of its holdings in its cellular subsidiary Pele-Phone. Revenues were down 2 percent to NIS 2.03 billion. Brokers remarked that the reports were expected and held no real surprises, ad they expect no special response from investors to the reports. The share was up today 5.5 percent.
Israel Chemicals (TASE: CHIM) climbed 6.6 percent on NIS 47 million in turnover after posting its results for the quarter. Revenues were up 25 percent to $558.6 million and profits were up 30 percent to $26.1 million. The Israel Corporation (TASE: ILCO ), which holds the controlling interest in Israel Chemicals jumped 10.1 percent.
The two banks ran strongly along with the rest of the market. Bank Leumi (TASE: LUMI ) was up 8.9 percent, while Bank Hapoalim (TASE: POLI ) traded up 6.2 percent on the day's biggest turnover of NIS 62 million, and Israel Discount Bank (TASE: DSCT) was up 5.6 percent.
Clal Industries and Investments (TASE: CII) was up sharply by 5.3 percent along with the rest of the market. Blue Square Properties (TASE: BLSQ) and Migdal Insurance (TASE: MGDL ) were both up 11.6 percent, while Osem Food Industries (TASE: OSEM) was yesterday's largest gainer, up 12.4 percent.
All the stocks in the TA-100 were up, with Osem leading the way. The smallest rise in the TA-100 was that of Teva Pharmaceuticals (Nasdaq:TEVA) and Granite Hacarmel (TASE: GRNT ), both up 2.8 percent.
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