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Tel Aviv stocks fell across the board yesterday in heavy trading as the global credit crisis escalated. Despite early signs of a rally on Wall Street, in Israel shares of banks and insurance companies fell hard, and the index tracking real estate stocks dropped 10%. Corporate bonds dived as well.

Not only finance-sector and property shares were slammed; so were stocks associated with the big tycoons such as Nochi Dankner, Yitzhak Tshuva, Lev Leviev, Eliezer Fishman and Moti Zisser.

The main concern is that the credit crisis and liquidity crunch will spread to Israel, diminishing big companies' ability to recycle their debts. If they can't borrow fresh money, Israel could be in for a financial crisis of its own.

Yesterday's sharp dive on the stock market reflects the uncertainty enveloping the finance sector. It's impossible to know for sure who's exposed and to what extent. Regulators are having difficulty pinning down the banks and insurance firms, in part because these companies are unsure themselves due to the complexity of the financial instruments they have invested in. Each contract has to be analyzed separately.

Worried Israelis have been asking whether a major local financial institution could collapse ? la Lehman Brothers. For now, that's a no. But that could change. The demise of Bear Stearns and last week Lehman Brothers, the sale of Merrill Lynch and now the American International Group's troubles hadn't been accurately predicted either.

Yesterday Israeli stocks fell hard as the shock waves from Wall Street hammered asset prices in Asia and Europe. Shares in Tokyo, Taipei and Hong Kong lost about 5%, but here at home blue chips tumbled 6% and the Real Estate-15 index lost more than 10%. Turnover was exceptionally heavy at nearly NIS 3 billion.

The TA-25 index fell more than 5%, bringing its loss for the year to 24%. The Finance-15 index sank 7.5% and the 15 companies comprising that index lost NIS 5 billion of their value. The Finance-15 pack includes the five big banks, the major insurance companies and one investment firm, DS Apex, which lost nearly 13%.

The big banks weren't far behind. Bank Hapoalim sank 7.6% on turnover of NIS 236 million, and Leumi fell 4.3% on a volume of NIS 201 million. Discount Bank dropped 7.6% in heavy trading. Among the insurers, Yitzhak Tshuva's company Phoenix was hardest hit, losing 14%, while Menorah plunged 13.5%. The giant Migdal fell by more than 5%.

The collapse of Lehman Brothers had been the event that triggered the pullback, but that was old news yesterday. The latest worry creasing investor brows was AIG, and fears that it would collapse and trigger another giant wave of bankruptcies. AIG shares were down 20% in late trading yesterday as the insurance company scrambled to find a $75 billion credit line to stave off collapse. As for the Israeli banks, investors are worried about the institutions' financial statements in the months to come because of losses on their foreign holdings, whether through their branches overseas or investments in derivatives.

Africa Israel fell 16%, bringing the real estate empire's stock-market loss since the year's start to 40%. One of the reasons for Africa Israel's plunge yesterday was that it's heavily invested in Russia, where stocks were pounded. Moscow's most liquid stock exchange, MICEX, suspended trade in the afternoon after a 17% drop, the worst one-day fall in 10 years. State bank VTB was down more than 32% when trade was suspended, and state savings bank Sberbank was losing almost 21%.

In Israel, shares of Elbit Medical Imaging, Moti Zisser's company, tumbled 15%, Nochi Dankner's IDB Development fell 14%, Tshuva's Delek Group sank 14.5% and Fishman's Jerusalem Economic Corporation lost 8%.