Market Report / Israeli Shares Hover Around Par After the Budget Is Sent to Ministries

Painful tax increases and spending cuts will be put to the vote this Monday.

The Tel Aviv Stock Exchange eased Wednesday in a day of ups and downs after the budget proposal for the rest of this year and all of 2014 was sent to the ministries. This coming Monday, the cabinet is slated to vote on the document, which includes painful tax increases and spending cuts.

The benchmark Tel Aviv-25 index and the broader Tel Aviv-100 both lost 0.1%. The TA-25 closed at 1,209.31 points while the TA-100 ended at 1,087.40. Volume was NIS 1.04 billion. The Banks-5 index fell 0.6%, led by Bank Hapoalim, which dropped 1.2%. The Real Estate-15 index bucked the trend and rose 0.6%.

Ofer Klein of Harel Insurance and Finance said the proposal would not encourage economic growth and would lead his firm to lower its outlook on 2014 growth if passed.

Private consumption represents about 60% of the country's gross domestic product but is sensitive to increases in value added tax and income tax, Klein said. Income tax will rise, according to the new budget, with VAT climbing from 17% to 18%. Also, taxpayers will not reap benefits by next year from economic reforms and structural changes that would eventually spur growth and lower the cost of living, Klein said.

On a positive note for the government Wednesday, 10-year index-linked Galil government bonds and unlinked Shahar bonds both saw declines in their yields.

Among losers Wednesday was Photomedex, which tumbled 5.2% following the release of its latest financial report. Ratio Oil Exploration fell 3.9% after the company raised NIS 50 million following a delay in the entry of Australian energy giant Woodside into the offshore Leviathan exploration site. Ratio has a 15% stake in the venture, which contains Israel's largest gas reserves. Gilat Satellite Networks also released earnings and lost 2.3%.

Among gainers were dual-listed Allot Communications and Ceragon Networks, which released financial reports the day before. Following an arbitrage gap, these stocks rose 4.1% and 3.6% respectively in Tel Aviv. EZchip Semiconductor also released its financial report and gained 3.2%.

Shares in Lev Leviev's Africa Israel Investment were sharply lower early Wednesday but ended the day up 2.2%. The Africa Israel Residences unit reported a 23% increase in first-quarter revenues, selling 133 homes for a total of NIS 262 million. The company's share in that was NIS 181 million, compared with NIS 92 million a year earlier.

Bloomberg