Market Report / Israel Chemicals Drops as TASE Rallies

'Sheshinski Effect' cited after treasury announces new panel to reexamine natural-resource royalties.

Tel Aviv shares joined a global share market rally on Monday, as investors got an extra hour to bid up prices under the first days of the stock exchange's new trading schedule. Israel Chemicals, hit by news the government will reexamine its royalty policy for nonpetroleum natural resources, dropped sharply.

The benchmark TA-25 index ended the session up 0.3%, at 1,228.98 points, while the broader TA-100 index advanced 0.4% to a close of 1.102.19 points. Turnover was a relatively high NIS 1.29 billion, perhaps due to the extra hour of trading.

Insurance and telecommunications shares, which have been pacing the market's recent rises, rose sharply. The Telecommunication index rose 3.7%, to 588.1 points, led by a 5% gain for Bezeq on heavy turnover of NIS 121.7 million. The TA-Insurance index wasn't far behind, rising 2.3% to 1,422.39 points. Phoenix was the top gainer for the sector, advancing 5.3%.

But ICL and its parent company, Idan Ofer's Israel Corporation, were hit hard by the treasury's announcement that it had tapped economist Eytan Sheshinski to lead a committee that will reexamine royalties on the state's mineral resources: Nearly all of these are mined by ICL.

Shares of ICL closed down 4.6% on turnover of NIS 179.5 million, making it the day's volume leader. Israel Corp., which owns 53% of ICL, fared even worse, dropping 6.3% as NIS 57.7 million changed hands.

On the whole, however, Monday was a bullish day on the TASE as global equity markets rose and the dollar strengthened against the yen on expectations the Federal Reserve will reinforce its commitment this week to supporting the U.S. economic recovery.

Stocks on Wall Street and major European indexes gained about 1% as investors anticipated the end of a two-day meeting of the U.S. central bank on Wednesday, when investors hope to get a better idea on Fed policy from chairman Ben Bernanke.

The Fed meeting has taken on increased significance since Bernanke said in May that the bank may decide to pare back its bond buying in its next few meetings if the economy gains momentum.

The FTSEurofirst 300 index of top European shares rose 0.7% to close at 1,184.36 points on Monday, while MSCI's all-country world equity index rose 0.9%. In early afternoon trading on Wall Street, the Standard & Poor's 500 Index was ahead 1.1% at 1,644.60 points and the Nasdaq Composite Index was 1.25% higher at 3,466.28 points. The dollar rose 0.9% to 94.92 yen. The euro fell 0.07% to $1.3336.

Against the shekel, the dollar also registered a small gain, adding 0.03% to a Bank of Israel rate of NIS 3.6020. The euro strengthened 0.1% to NIS 4.8058.

"Last Friday's low inflation index strengthens the view that the Bank of Israel can resume using the interest-rate weapon even in the short term alongside with dollar buying," said the CEO of the Prico Group investment house, Yossi Fraiman, in reference to the unexpectedly low 0.1% rise in the May consumer price index.

In the bond market, expectations of another central bank rate cut enabled government bonds to extend their Sunday gains. The 10-year shekel bond, unlinked to inflation, rose 0.06%, trimming its yield to 3.69%. The Consumer Price Index-linked 10-year government bond edged up 0.01%, to bring its yields to 1.51%.

Corporate bonds were similarly higher, with the Tel Bond-20, -40 and -60 indexes adding as much as 0.4%. Petrochemical Enterprise Series Dalet bonds were the focus of attention, with yields at 197%. Electra Real Estate Series Dalet bond rose 3.5% after the company said in the morning it planned to divest its portfolio of Canadian property assets. The bonds currently yield 10.5%.

Shares of Amot, a unit of Natan Hetz's Aloni Hetz, sank 5.2% after it announced on Monday a NIS 152 million offering of shares and warrants. Amot is taking advantage of a 27% run-up in its share price over the past year to a five-year high.

Reuters contributed to this report.

Hagai Fried