The Economy in 2013 / The Stock Market

From Year of the Bear to Year of the Bull

The Tel Aviv Stock Exchange rebounded from a weak start of managerial upheaval.

It was a tumultuous year for the Tel Aviv Stock Exchange, in which bearish performance and managerial upheaval in the first few months rapidly evolved into a more bullish atmosphere.

While much of the developed world’s markets went from one record high to another in the first half of 2013, the TASE underperformed while trading volumes declined. They averaged around 1 billion shekels a day, less than half 2010 levels. TASE CEO Ester Levanon and chairman Saul Bronfeld both stepped down in an acrimonious dispute with the Israel Securities Authority over how to correct the problem.

But the market began to rebound in the waning days of August, initially prompted by the end of the Syrian chemical weapons crisis. On November 21, the TA-25 index hit a record high and kept climbing in the weeks that followed. As of yesterday, the benchmark index was up 12.5% for the year and the broader TA-100 index was up 15.2% — less than many counterparts abroad but still a respectable return.

Trading volume also picked up, if not to the level of three years ago. In the final months of the year it averaged 1.2 billion shekels a day, 10% more than in 2012.

At the beginning of November, Yossi Beinart, an Israeli who heads Chicago’s North American Derivatives Exchange, or Nadex, was chosen to replace Levanon. Beinart takes over at the start of 2014.

The top performer on the TA-100 index for 2013 is likely to be B Communications, Shaul Elovitch’s holding company and the parent of Bezeq, with medical equipment maker Mazor Robotics just behind it.

With three trading days remaining in Tel Aviv, shares of B Communications rose 312% on an adjusted basis, nosing out Mazor Robotics which gained 311%.

B Communications rode the crest of the comeback wave this year by telecom stocks, particularly those involved in mobile phone services. They tanked in 2012 when the cellular market was opened up to low-cost competition and investors fled.

But last year’s telecom turkeys became this year’s hits as the three veteran market players – Cellcom, Partner Communications, and Bezeq subsidiary Pelephone – adapted to the new situation and investors flocked back. Bezeq provided a 70% return for the year, followed by Cellcom (56%) and Partner (42%).

Mazor Robotics, trading at a market valuation of 1.4 billion shekels, develops robotic equipment used in spinal surgery. After rival Mako Surgical was bought out several months ago by Stryker Medical for $1.65 billion, investors are convinced that Mazor is a candidate for a takeover.

Mazor said during the year that its system had been used to perform 40 brain operations.

The year’s biggest blue-chip loser was Israel Chemicals, controlled by Israel Corporation, which has fallen 31% since the beginning of the year after adjusting for dividends. The year has been almost nothing but bearish for the company.

The stock was pummeled first by an abortive attempt by Potash Corporation of Saskatchewan, ICL’s second biggest shareholder, to buy control. Next was the resurrection of the government’s Sheshinki committee on natural resource rights, which threatened to raise the royalties ICL pays for Dead Sea mineral rights.

Finally, a global crisis in the fertilizers market erupted in July when the Russian potash producer Uralkali said it was pulling out of a cartel that controls 70% of the world’s potash supply, a move that prompted a drop in potash prices. As the world’s sixth-largest potash producer with a 9% share in the global market ICL was hurt by the fallout.

Bloomberg