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The drop in interest rates and the stock market's take-off in 2003 have led to a huge number of new bond issues and stock sales. In total NIS 9.3 billion have been raised in the markets since the beginning of the year.

The rising tide in the stock market, in addition to the sharp drop in bond yields that followed the bull market, have combined with the bank credit crunch and the decrease in government bond issue, to bring about a real flowering of corporate fund-raising. The massive bond issues along with sales of stakes by controlling shareholders signal a sea change in the Israeli markets.

Since September, NIS 5.8 billion has been raised in bond issues, while controlling shareholders have sold stock worth NIS 1.5 billion. From the beginning of 2003, these controlling shareholders have sold NIS 3.5 billion of their stakes.

There has been at least one new issue a day for the past few weeks, and sales of stock packages worth tens of millions of shekels have become a daily occurence. Demand for these issues is much greater than supply, and firms usually increase the size of the offer on the issue date when the volume of demand becomes clear.

For example, Mekorot - the national water company - planned on raising NIS 300 million in bonds, but doubled the amount to NIS 600 million in the wake of enormous demand.

In the last week, firms have raised some NIS 900 million through bond issues while hundreds of millions of shekels in shares were sold by controlling interests.

Yesterday, Ormat's institutional offering reached a demand of NIS 500 million, with the issue closing at the maximum price. In the end Ormat choice to raise NIS 300 million, instead of the original amount of NIS 250 million.

Subsidiaries of the IDB group including Discount Investments, IDB Holdings and Azorim, raised NIS 1.3 billion over the last four months. Since the Ganden group took control, IDB has raised over NIS 2 billion.

Among those firms whose controlling shareholders have sold packages of stock is the Salt Industries controlled by the Dankner family, which sold shares of Bank Hapoalim for NIS 48 million; Yitzhak Tshuva sold Delek and Delek Motors shares for NIS 132 million; and Goldman Sachs sold IDB shares worth NIS 40 million. The Dankner family also sold shares in cable operator Matav.

Even a kibbutz - Ramat Yohanan - sold a NIS 9 million package of Palram shares yesterday.

Underwriters report that a large number of companies traded on the stock market are presently preparing for an issue: either negotiating with underwriters, requesting a bond rating from the Maalot rating agency, or making presentations to institutional investors. Even second- and third-rank companies have tried to raise capital, such as real estate firms.

One of the parties who used the rising market to sell off holdings at a good price, was the State of Israel. It sold Bezeq shares in November for NIS 700 million. Demand for the offer was in the billion-shekel range, and most of the stock was sold in the end to foreign investors above the market price.

Alongside the drop in yields on government bonds, the fears of a financial crisis, which would lead to massive corporate defaults, disappeared. Therefore, more institutions in the business sector are searching for investments with higher returns. Also, the high level of returns for provident and advanced training funds (keren hishtalmut) in 2003 - accompanied by the drop in bank deposits due to low interest rates offered and new taxes - have led to a change in the public's investment preferences.

The massive redemptions of the provident funds have stopped, and mutual funds are raising billions of shekels a month. This, along with the end-of-the year deposits, has added to the funds available for investment.