Fischer’s Exit Sends Stocks Lower

The benchmark TA-25 index was trending lower through mid-afternoon when the surprise announcement came, sending the index down as low as 1.3% before edging up again to end at 1,186.50 points, a drop of 0.9% for the session.

Stanley Fischer’s announcement that he plans to step down as governor of the Bank of Israel in June sent shock waves through the Tel Aviv Stock Exchange, although at the end of trade Tuesday share prices were only slightly lower.

The benchmark TA-25 index was trending lower through mid-afternoon when the surprise announcement came, sending the index down as low as 1.3% before edging up again to end at 1,186.50 points, a drop of 0.9% for the session. Turnover was light at NIS 922 million.

The broader TA-100 index fell 0.8% to close at 1,057.89 points. The Banks-5 declined 1.4% to 1,129.90 points. Bank Leumi and Israel Discount Bank were both down 1.7%, followed by Bank Hapoalim (down 1.6%) and First International Bank of Israel (down 1.4%). Only Mizrahi Tefahot finished higher, gaining 1.1%. In foreign currency trading, the shekel was weakened by news of Fischer’s planned departure. Both the dollar and the euro were weaker before the announcement, with the greenback’s Bank of Israel rate set at NIS 3.729 and the euro’s at NIS 5.0096. But in late trading the U.S. currency appreciated to NIS 3.7317 at about 6:30 P.M. local time and the euro to NIS 5.0318.

“The announcement of Stanley Fischer’s resignation increases the economy’s risk premium and is particularly problematic in a period when there’s an absence of clear economic leadership, personnel shake-ups at the treasury, a coalition in formation and the fact there isn’t even a leading candidate for the post of finance minister,” said Ela Alkala of IBI Israel Brokerage & Investments.

Coalition talks have not formally begun in the wake of the January 22 election, not while the budget-making process for the 2013-2014 fiscal package has been disrupted by infighting in the treasury, where Eyal Epstein, a key official in the budget division, was demoted this week.

Alkalai noted that Fischer is committed to staying at his post until the end of June, which should help keep the situation stable.

“The Israeli government needs to reduce the window of personnel uncertainty and to fill this critical post with an economic personality who is recognized by the public as an appropriate successor,” added Yaniv Fagut, chief strategist at the Ayalon Group. He referred to Fischer as Israel’s “economic foreign minister” and said his shoes would be hard to fill.

European equities scaled fresh two-year highs on Tuesday, boosted by miners, as optimism about economic recovery gained momentum following encouraging U.S. home price data and comments over growth in top metals consumer China. The FTSEurofirst 300 provisionally ended up 0.5% at 1,178.55, its highest close since February 18, 2011.

In Tel Aviv, Israel Chemicals led the most actives, with some NIS 75.4 million in shares changed hands Tuesday on a decline of about 0.5%.

Ormat Industries, extended its rebound after dropping on news its U.S. unit would be taking a major charge in the fourth quarter of 2012. Ormat rose 6.1%, making it the biggest gainer among TA-100 stocks Tuesday and making a 14% rise since it bottomed out January 23. Given Imaging continued higher on reports that the U.K. private equity fund Permira may buy control of the company. Given was up 1.9%.

Babylon ended higher as well, adding 1.9% after it said this week it would report fourth-quarter earnings early in a sign it was gearing up for its long-anticipated initial public offering in the United States.

Reuters contributed to this report.

Ofer Vaknin
Tomer Appelbaum