Shares on the Tel Aviv Stock Exchange plunged for a second day Monday as plummeting world oil prices rattled stock markets around the world. The dollar and the euro strengthened against the shekel.
The market’s opening was delayed by 30 minutes after the bourse’s circuit-breaker mechanism was employed for the first time since the 2008 financial crisis when the TA-35 index opened more than 5% lower.
The benchmark index fell as much as 9% before recovering some of its losses to end 6.5% lower at 1,368.87 points. It was the biggest one-day drop since August 2011. Trading volume reached 4.8 billion shekels ($1.36 billion), the highest level in a decade.
Much of the selling Monday was driven by continued heavy redemptions at mutual funds, which market sources said had reached 5 billion shekels.
Stocks fell amid growing anxiety over the impact of the coronavirus on the world and Israeli economies. On Monday, the Bank of Israel sharply lowered its forecast for Israeli economic growth to 2% in 2020 from a previous estimate of 2.9%. It cited both the effect of a global slowdown and Israel’s increasingly tough policies to prevent the epidemic’s spread.
In the foreign currency market, the dollar gained 0.6% to a representative rate of 3.508 shekels and the euro added almost 1.9% to 4.0053.
Kobi Levi, head of market strategy at Leumi Capital Markets, attributed the shekel’s weakness in the last two weeks to the sell-off in the stock market as well as a global flight to safety due to the coronavirus.
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“So far the shekel has weakened less than expected,” he said in a vote to investors. “This, it appears, is due to Israel’s joining the [Financial Times] World Government Bond Index, which has supported the shekel because foreign institutional investors now need to buy shekel bonds and shekels.”
In the stock market, the oil and gas sector continued to lead the declines as oil prices plunged in response to Saudi Arabia’s decision to increase production. Delek Group dropped 24%.
Insurance shares were also pounded; some stocks fell as much as 30%. The reason is falling bond yields, which will force insurers to increase reserves. Migdal shares bounced off their lows for the day but still finished down 13.8%.