Market Report / Israeli Stocks Gain on Weekend Global Rally

Trading marked by upheaval at IDB group and demise of Better Place.

Share prices steadied on Sunday after Thursday's 1.4% drop as global markets recovered on Friday.

The Tel Aviv Stock Exchange's benchmark TA-25 index advanced 0.7% to 1,224.12 points on Sunday, and the broader TA-100 advanced by 0.8% to 1,100.10. Turnover was a light NIS 600 million.

Yaniv Pagot, chief strategist at Ayalon Group, noted that ahead of Tel Aviv's rebound, global markets had steadied on Friday. "Thursday's trading was influenced by the drop in global equities, particularly Japan's stock indices, but over the weekend it became clear that it was premature to mourn the global rally."

On Wall Street, the Standard & Poor's 500 Index fell for a third consecutive day on Friday, with the three major stock indexes posting their first negative week since mid-April on lingering concern that the U.S. Federal Reserve may scale back its stimulus measures.

Still, the indexes closed well off their lows in light volume ahead of the three-day Memorial Day weekend, and S&P lost only 0.06% to finish at 1,649.60. The Dow ended slightly higher, up 0.06% to 15,303.10 at the close.

In Europe, the FTSEurofirst 300 closed down 0.3% at 1,226.58.

In foreign currency trading on Friday, the dollar lost some ground against the shekel, weakening 0.16% to a Bank of Israel rate of NIS 3.69.60. The euro, however, strengthened by more than 0.6% to NIS 4.7983.

On the TASE Sunday there were a handful of big winners and losers thanks to two dramatic developments.

The first was an agreement reached by bondholders in IDB Holding Corporation and IDB Development Corporation – two holding companies at the top of the IDB group. Early on Friday the bondholders of the two group companies announced they had agreed to a debt-for equity swap that would wrest control of the group from Nochi Danker. (They have agreed, but Dankner doesn't accept the deal and the courts have yet to have their say.)

IDB Holding Series B4 bonds jumped 14.75% while its Series B5 bonds advanced 9.2% and B3 gained 6.7%. But IDB Development Series B8 bonds were down 6.85% and IDB Holding stock fell 4.7%.

Discount Investment Corporation, an IDB Development subsidiary, gained 4%.

In a related development, shares of the IDB subsidiary Clal Insurance rose 1.9%, lifting the company's market capitalization to NIS 3 billion. IDB said over the weekend that an unnamed overseas investment fund had offered to take a 27.5% stake in Clal and an option to buy more shares later at a NIS 4.5 billion valuation.

Other insurance companies rose as well. Migdal gained 2.2% and Phoenix gained 2.4%, helping to make the sector the top performer of the day. The TA-Insurance index finished 1.1% higher at 1,365.90.

Meanwhile, shares of The Israel Corporation rose 4.4%, making it the top gainer among TA-100 stocks on Sunday, after it reported that it had decided against putting more money into its troubled electric-vehicle refueling startup, Better Place.

"The side effect of Israel Corporation's stop-loss [order] on Better Place was a nice rise in the share prices," said Pagot. "Investors didn't see how the Better Place lemon would ever turn into lemonade."

However, Baran, an engineering company that had contract with Better Place and which will be forced to write off some NIS 37.5 million in debt, lost 5.7%.

Food maker Osem declined 1.5% after reporting tepid first-quarter results. Net profit edged up 1%, boosted by cost-cutting and lower financing costs, to NIS 94.59 million. But sales fell 1.4% at home to NIS 1.01 billion, and they were down 3.7% overseas.

Exalenz BioScience, whose technology makes medical diagnoses based on patients' breath, soared more than 51% after it said the U.S. Food and Drug Administration had approved a new version of its flagship BreathID product.

With reporting by Reuters and Eran Azran.

Bloomberg