TA-25 crosses 1,000-point barrier for the first time since crisis began

The Tel Aviv Stock Exchange is hot, and has found no reason to slow its amazing rise so far this year. The blue chip TA-25 index rose more than 2% yesterday, to cross the 1,000-point barrier - on the way up - for the first time since the global financial crisis started, after weeks of almost reaching, touching and retreating.

Monday's announcement by Bank of Israel Governor Stanley Fischer of a 0.25% interest rate hike for September only fanned the optimistic flames. But despite the higher rates, investors are showing with their money that they still see stocks as the best investment bet for now.

The TA-100 rose 1.6% yesterday, to end the day at 931.5 points. Bank shares gained 2.2%, though the Real Estate-15 index was down 1% for the day. Turnover was NIS 2 billion.

The TA-25 index, then also known as the Maof, started at 100 points at the beginning of 1992. Since then it has risen by just over 900%, closing at 1,002.7 points yesterday. This is an annual return of 14.75% over the last 17 and a half years. Inflation over the same period averaged 1.3% annually, leaving a real return of about 13.5% for investors since 1992.

The TA-25 index opened 2003 at 335 points, and it has climbed 200% in the past six and a half years. Its high-water mark was at the end of October 2007, when the index reached 1,237.12 points, but then fell 46% in 2008. In December of last year it was only at 654 points.

Since then the TA-25 has almost only seen a run upward, though the the present 1,000-point level has only symbolic, psychological meaning and no special economic significance.

The first time the index closed over 1,000 points was February 19, 2007. It was back at that level at the beginning of April 2008, and passed the 1,000 barrier on its way back down in December 2008. Three weeks ago the TA-25 returned to 999 points, but retreated almost immediately.

Monday evening's interest rate announcement, a 0.25% increase to 0.75% for September, came after five months when Fischer left the short-term central bank lending rates unchanged at 0.5%. Economists had differed beforehand as to what Fischer would do, but in the end he decided Israel would be the first country to raise rates, after central banks all over the globe cut them drastically to aid recovery from the economic crisis.

The stock market reacted yesterday not only to the interest rate announcement, but also to flood of second quarter financial reports. Publicly traded firms have until the end of the month to file their financials.

"What we are seeing is the Butterfly Effect. The expansionary monetary policy combined with almost zero interest rates have given investors the confidence to return to the stock market, since they have no alternative," said Gili Cohen, investment manager at the Excellence-Nessuah investment house. He feels the market will continue to rise.

"The number 1,000 has no significance. No one knows how to time the market, and that is why people are returning. Now the burden of proof is on the economic statistics. The market is now neither cheap or expensive.

"The trend will continue, since despite interest rate increase, interest is still low. Investors have no alternative and that is why this trend will continue. There will be corrections, but it will continue. At the end of the process we will see short-term government bonds [Makams] at over 3% yields, but the central bank's acts will be measured in order to correct the expansionary fiscal policy," added Cohen.

A senior mutual fund manager stated, "The [TASE] gains do not really reflect an improvement in the real economy. There is no correlation between the rise and the economy. The public is once again interested in stocks. We see that through the flow [of money] into mutual funds investing in stocks. There is no great storming into stocks, but a small but sure flow. The recovery in company profits will allow the governor of the Bank of Israel to raise interest rates more easily. We have seen that most of the nightmare scenarios are behind us," he added.

Bank Leumi rose 3.2% yesterday and lead bank shares up by 2.2%. Bank Hapoalim gained 0.8%. Israel Discount Bank jumped 5.2%.

Isramco, one of the partners in the Tamar and Dalit natural gas field discoveries, was up 1.7%. Isramco released its financials yesterday, revealing a quarter of growth: Revenues were eight times higher, at NIS 92.5 million, than they were in the parallel quarter of 2008, and net profits were NIS 90 million. (See story, Page 8.)

Alrov gained 3.9% on the strength of its report. Africa Israel was down 0.1% as it continued to sell off assets. (See story, Page 11.)

The Excellence investment house gained 3% after reporting a NIS 25 million profit for the second quarter, a 24% fall from the same quarter of 2008, though its profits for the first half of 2009 were up slightly at NIS 65 million.

Vaccine developer BiondVax jumped 10.3% as it announced that tests show its universal influenza vaccine may also be effective against the H1N1 virus, also known as swine flu.