Market Report / Bank Shares Sour the Mood

After credit rating agency Moody's expressed concern about lenders' exposure to business borrowers. TA-25 and TA-Banking index briefly enter the red, but close at 1,177.36 and 1,119.32 points respectively.

Bank shares weighed on stocks on Thursday after the credit rating agency Moody's expressed concern about lenders' exposure to business borrowers.

The Moody's report brought both the benchmark TA-25 and the TA-Banking index briefly into the red in the afternoon before they managed to eke out a last-minute recovery. The TA-25 ended less than 0.1% higher at 1,177.36 points by the closing, and the TA-Banking index ended 0.2% higher at 1,119.32.

The TA-100, however, failed to fully recover its losses and ended down just under 0.1% to 1,046.72. Turnover was NIS 1.09 billion.

In a week punctuated by distressing news - most notably Bank of Israel Governor Stanley Fischer's resignation and the Air Force raid on Syria - the TA-25 lost 1.6%, pushing it into minus territory for the year as of Wednesday. The TA-100 index was down a similar percentage.

The best performer among the sectorial indices was the TA-Biomed index, which gained 2% for the week, bringing its year-to-date increase to 6.2%. Last year, the index gained nearly 10%.

Moody's called the outlook for the Israeli banking sector Negative, reiterating its view from May 2012, citing "subpar" economic growth, "significant exposure to the highly leveraged corporate sector" and pressure on mortgage portfolios. It also cited "tight capital metrics and low profitability" relative to those of banks in similar countries for its outlook.

Bank Leumi ended the session down just less than 1%, Israel Discount Bank down 0.3%, and First International Bank of Israel down 0.1%. Bank Hapoalim scratched out a 0.6% rise.

Mizrahi-Tefahot gained 3.3% in heavy trading exceeding NIS 50 million. As reported by TheMarker, the bank's controlling shareholders turned down a plan to acquire Discount's New York operations, a move that would have required the bank to dilute existing shareholders by raising additional equity capital.

The bank, the report said, remains committed to its domestic market focus.

Euro at one-year high

In currency trading, the dollar and the euro made gains on the shekel. The greenback's Bank of Israel rate was set at NIS 3.728, a gain of about 0.8% for the currency. The euro advanced 0.14% to NIS 5.0534, bringing it to a 12-month record.

Union Bank of Israel attributed the euro's gain to the sustained recovery of the European economy - not counting continued high unemployment - since the middle of last year.

In Global trading, the euro was little changed at $1.3563 late Thursday after reaching its strongest level since November 2011 the day before. It was on track for a 2.8% rise this month, the biggest since October 2011.

European shares fell as investors waded through a stack of earnings reports, with disappointing results from heavyweights AstraZeneca and Royal Dutch Shell taking their toll on market sentiment. The FTSEurofirst 300 was 0.4% weaker at 1,166.31 by 1233 GMT, extending Wednesday's drop.

Israel Chemicals fell 1.4% and led the most actives, with NIS 87.1 million in shares changing hands. In an indication of market conditions, Potash Corporation of Saskatchewan, an ICL rival as well as a shareholder with a 14% stake, reported an unexpectedly sharp 38% drop in quarterly profit on Thursday as key potash buyers China and India stayed out of the market. It also gave a first-quarter outlook below Wall Street's forecast.

Shares of BioCancell jumped nearly 33% after the biotech company reported Thursday morning that it is in preliminary talks with an unidentified multinational pharmaceuticals company, in connection with licensing rights to its BC-819 bladder-cancer treatment. BioCancell said that as a result it was suspending merger discussions with its parent company, Clal Biotechnology, whose shares ended 3% lower for the day.

Clal Biotech shares were also under pressure from news that Teva Pharmaceuticals was ending its cooperative agreement with their joint venture company CureTech.

Energy shares were sharply lower, with the TA-Oil and Gas index finishing down more than 1% to 1,099.59 points. The delcine was led by Avner, which dropped 1.6%, Delek Drilling's 1.7%, slump and Isramco 0.7% pullback. Running against the trend, Modiin Energy advanced 2.8% after it announced it had completed another NIS 30.3 million fundraising in a right offering to help finance drilling at its Gabriel license.

 

Reuters contributed to this report.

Reuters