Coronavirus Fears in Israel Send Shekel and Stocks Tumbling

Drop of 3.7% on Thursday against dollar brings loss since February 11 to 6.4%

The Tel Aviv Stock Exchange ticker shows stocks are down, March 9, 2020.
Eyal Toueg

Until recently one of the world’s strongest currencies, the shekel is now being off-loaded by investors as the novel coronavirus pandemic spreads. Since it reached its recent high against the dollar February 11, the shekel has depreciated 6.4%.

On Thursday alone the Israeli currency lost 3.7% of its value against the dollar to a representative rate of 3.6390, its weakest since May 2019. The euro appreciated 2% to 4.0861 shekels, its strongest level in a year.

Other currencies also gained on the shekel, the yen by 2.1% to 3.5 per 100 yen and the pound sterling 0.6% to 4.61 shekels. Against the Bank of Israel’s basket of currencies, weighted based on Israel’s main trading partners, the shekel weakened 0.8%.

Investors appear concerned that the Israeli economy will be badly affected by the pandemic, leading to an increase in the government’s already large budget deficit, all at a time when successive elections have yet to produce a permanent government.

Gil Bufman, chief economist at Bank Leumi, said that under his most likely scenario, the shekel had probably put its biggest losses behind it. He warned that in his most pessimistic scenario, however, the currency’s losses could accelerate.

“Nevertheless, in light of falling global commodity prices, oil in particular, reduced purchasing power and consumer confidence, the impact of shekel weakness on inflation will be minimal. The Bank of Israel interest rate is expected to come down and in the most pessimistic scenario even turn negative,” he said.

Meanwhile, the Tel Aviv Stock Exchange posted its sixth straight session of heavy losses as coronavirus fears showed no signs of being contained. The benchmark TA-35 index ended the day down 5.2% at 1,251.56 points, making a drop of 18.6% for the week and 25.6% since the start of the year. The TA-125 index fell 6.4% to 1,194.60, with only three of its component stocks ending higher for the day.

The most severe declines continued to be in the energy sector as global oil prices extended their declines. The TASE’s Oil and Gas index finished down 12.3%, paced by another day of big declines for Yitzhak Tshuva’s Delek Group. Delek finished down 51% to end at 54.40 shekels ($14.75), a drop of 83% since March 2.

Despite the big losses on Wall Street Thursday, Compugen raised about $75 million in a public offering. The Israeli clinical-stage cancer immunotherapy development company priced 8.3 million shares at $9.00 each.

Compugen’s shares closed at $11.83 on Nasdaq Wednesday after hitting a year high of $12.80 Tuesday when it reported data from a clinical trial in patients with advanced solid tumors.