Market Report / Israel Chemicals, Mellanox Cast Pall Over Stocks

Only biotechnology remained lively on news of the second big corporate merger in the industry in less than a week.

The Tel Aviv Stock Exchange ended lower on Sunday, with the TA-25 Index falling below 1,200 points, weighed down by Israel Chemicals and Mellanox.

The benchmark index of blue chip stocks fell 0.7% to a close of 1,196.80 points, while the broader TA-100 lost 0.5% to 1,073.27. Turnover was just NIS 523.3 million, a lower figure even for a Sunday when no foreign investors are trading.

The only sector to show significant gains for the day was biotechnology, where the TA-Biomed Index ending 1.9% higher at 860.39. The sector was given a boost by news of another big biotech mergers-and-acquisitions deal – the second in less than a week – with China's Shanghai Fosun Pharma's saying it would buy closely held Alma Lasers for $240 million.

Last week, Miami-based OPKO Health said it had agreed to buy the Israel-based biopharmaceutical company Prolor for $480 million. The deal has come under fire because Philip Frost is a chairman and major shareholder in both companies, but the stock continued to rally Sunday, closing almost 3% higher.

Other biotech stocks to gain included Protalix BioTherapeutics and Compugen, which led gainers among TA-100 stocks, on advances of 5.7% and 5.1%, respectively.

The story of the day, however, was Mellanox, which extended its losses in the wake of last Wednesday's release of its financial results, when the semiconductor company cut its 2013 earnings estimate from $2.11 to $1.06 a share and its 2014 estimate from $2.91 to $1.89. The shares closed .1% down in Tel Aviv on the heels of a 7.9% drop Thursday, closing an arbitrage gap with its New York-traded stock.

Israel Chemicals continued the decline that set in last Thursday after Potash Corporation of Saskatchewan pulled out of a bid to buy control of the company. The shares dropped another 2.3%, leading the most actives on turnover of NIS 66.32 million, after a 4.5% drop on Thursday. Israel Chemicals' parent company, The Israel Corporation, also continued lower, shedding 2.7% Sunday.

United States stocks dipped in thin volume on Friday, though the market had a strong week overall despite a mixed bag ofearningsand weak economic figures. The market fell early after a negative surprise from the gross domestic product report, but the decline attracted bargain-hunting investors late in the session.

The S&P 500lost 0.2% to 1,582.24, and theNasdaq Composite dropped 0.3% to 3,279.26.

European shares also fell Friday as some downbeat corporate results and disappointing U.S. economic data cast a shadow. The pan-European FTSEurofirst 300 Index closed 0.10% lower on the day at 1,196.41 points but was still up 3.8% for the week, its best performance in five months, on mounting expectations that the European Central Bank will cut interest rates next Thursday.

In foreign currency trading Friday, the dollar extended its losses against the shekel. The Bank of Israel rate for the greenback was set at NIS 3.0640, preciously close to the bottom of the range it has traded at. Meanwhile, the euro lost more than 0.3% to NIS 4.6989.

Shares of IDB Holding Corporation soared 10.6%, while its Series Gimmel and Dalet bonds – still bearing double and triple digit yields – climbed 11.4% and 10.9%, respectively. Argentinean investor Eduardo Elsztain agreed Thursday to inject NIS 57 million directly into the company, subject to creditors agreeing on a debt restructuring, and to put another NIS 18 million into Dankner's closely held Ganden Holdings.

Sunday, meanwhile, the Tel Aviv District Court gave IDB Holding's wholly owned subsidiary IDB Development two days to reach agreement on rescheduling NIS 3.2 billion of debt held by its own bondholders. IDB Development bonds climbed about 5% in the day's trading.

Shlomo Eliahu's Migdal Insurance announced a NIS 200 million dividend distribution Sunday, representing about half its profits for 2012. Migdal will remain with NIS 3.9 billion in retained earnings after the payout and NIS 4.6 billion in equity. Shares shed 2% in value for the day in moderate trading.

Gaming company Queenco fell 8.2% after it cautioned Sunday morning that it faces a "going concern" warning on its upcoming financial report. It said the valuation of one of its key assets, Club Hotel Loutraki in Greece, will probably be substantially reduced. Queenco bonds fell another 10% for a total decline of 40% over the past year to bring their yield to 99.8%.

With reporting by Reuters.

Reuters