Market Report / Bank Shares Lead Market Higher

Shares of Israel's banks drove the Tel Aviv Stock Exchange higher, while the Central Bank took action to stop the shekel's strengthening against the dollar.

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Bank shares led the Tel Aviv Stock Exchange higher on Tuesday as global markets expressed more confidence that the U.S. Federal Reserve would continue its stimulus activities for the foreseeable future.

The benchmark TA-25 index ended ahead 0.3% at 1,231.83 points on tepid turnover of NIS 879.9 million. The TA-100 was up 0.2% at the finish at 1,110.52.

"The color green is returning to the screens in Tel Aviv," said Hezi Yanushavsky, head of research at ATrade. "If there is a serious recovery in overseas markets, the [TA-25] index is likely to return to 1,240 points. If there is a major correction in global markets, the index will go lower to a support level of 1,180 points. Breaking that level would drive the index to below 1,100 points."

Bank shares moved ahead strongly, with the TA-Banks index up 1.5% at 1,193.97 points. Bank Hapoalim paced the rise, adding 1.8% on turnover of NIS 54.2 million, making it the most heavily traded stock of the day. Mizrahi-Tefahot Bank rose 1.7%, Bank Leumi 1.2% and Israel Discount Bank 1.3%.

First International Bank of Israel rose a more modest 0.4% even though it announced on Tuesday that it would resume paying dividends. The bank, Israel's fifth largest, said it decided on the change of policy after its capital adequacy ratio reached 9.81% at the end of the first quarter, much higher than the 9% the Bank of Israel is requiring.

Stocks around the world edged higher on Tuesday amid expectations the Fed will maintain its stimulus program to bolster the nascent U.S. economic recovery. The pan-European FTSEurofirst provisionally closed 0.3% higher at 1,211.07 points. In New York at mid-morning, the Standard & Poor's 500 Index was down a fractional 0.06% at 1,639.48 while the Nasdaq Composite Indexwas up 0.05% at 3,467.24.

The Fed could reduce its massive bond-buying stimulus this summer, but any such decision depends on continued improvement in the economy, two top central bank policymakers said in carefully hedged remarks on Monday. But data on Tuesday showed that the U.S. trade deficit had widened, potentially strengthening the case of those predicting stimulus will continue.

While the news caused the dollar to climb on Tuesday against major currencies, it lost heavily against the shekel, prompting the Bank of Israel to intervene. Despite its efforts, the U.S. currency still lost 0.3% to a Bank of Israel rate of NIS 3.676. The euro strengthened 0.3% to NIS 4.8093.

Shares of Mellanox, the embattled semiconductor company, resumed their slide downward on Tuesday, falling another 2.8% as NIS 45.8 million changed hands. The stock has tumbled on the company's plans to delist from the TASE, but is meeting resistance from at least one institutional investor – Harel Insurance, which has enough shares to demand a shareholders vote on the move.

Mellanox also reported yesterday that it signed an agreement to purchase closely held IPtronics for $47.5 million in cash.

Other big losers on Tuesday were Evogene, which led the TA-100 index lower by 3.2% after it announced it was planning to sell an unspecified number of shares for trading on the New York Stock Exchange. Alon Blue Square extended it declines another 3.2%, bringing its loss since the start of the week to 15%. The retail group reported a NIS 41 million first-quarter loss.

Discount supermarket chain Rami Levy continued to lose altitude after its stock was downgraded by Citigroup to Neutral from Buy. It dropped 3.1% on Tuesday. Online translation company Babylon also fell 3.1%.

Pluristem, a developer of placenta-based cell therapies, rose 3.3% even though the U.S. Food and Drug Administration placed a clinical trial the company was conducting on hold due to a serious allergic reaction in one of 74 patients.

With reporting by Reuters.

Bank Hapoalim controlling shareholder Shari Arison. Credit: Reuters

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