The Tel Aviv Stock Exchange ended sharply lower for a second day in heavy trading Monday, as worries about China’s economy pummeled global markets.
Virtually no stock escaped the sell-off – with just food maker Osem Investments alone among the TASE’s top 100 companies to end the day higher. The benchmark TA-25 index finished the day down 3.5% at 1,568.68 points, slightly off its low for the day of 1,547, but leaving it down 7.5% over the last two days and 9% from a record high just three weeks ago.
The broader TA-100 dropped an even sharper 3.9% for the day to end at 1,360.60. Some 3.69 billion shekels ($951 million) in shares changed hands, more than double the daily average in recent weeks. Israel’s VIX index, popularly known as the fear index, jumped 2.7% Monday, capping a two-day rise to 11.5%.
“We don’t have a single client at the moment who’s calling up and telling us to buy anything. Everyone’s scared. Even we don’t have the courage right now to buy any new securities. We want to see when the declines come to an end,” said Shlomo Meir, investments manager at DBM Investments.
“When will it stop falling? Prophecy is given to fools. History is never repeated on the bourse,” he said, adding, however, that a 10% drop would be a critical testing point.
Investors pulled out another 2 billion shekels from mutual funds Monday, adding to the 1 billion of redemptions they ordered the day before, although much of Monday’s increase was in foreign-invested funds. “There’s no question the public is feeling the pressure and we’re seeing big redemptions, but it’s still not a panic,” said Zahi Koren, CEO of Excellence Mutual Funds.
The rout was far deeper among stocks deemed especially vulnerable to a rapidly changing global economy, with technology indices down 5% or more and the biomed indices losing a stunning 7%. Energy shares were down sharply, too, as the price of crude oil tumbled to its weakest levels in 6.5 years.
“We live in a global market and we’re seeing declines of 2.5% to 3% all over the world – except for Shanghai, which is the source of the problem,” said Ronen Matmon, investments manager at Excellence Provident. “We need to look at China as the source of the problem and to ask whether the Chinese government will act.”
A near 9% slump in Chinese stocks Monday was their worst performance since the depths of the global financial crisis in 2007, and wiped out what was left of the 2015 gains – which in June had been more than 50%.
With the latest slide rooted in disappointment that Beijing did not announce expected policy support over the weekend, all index futures contracts slumped by their 10% daily limit, pointing to more bad days ahead.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 5.1%, to a three-year low. Tokyo’s Nikkei ended down 4.6 percent and Australian and Indonesian shares hit two-year troughs.
From Asia the rout moved to Europe, and finally to the United States.
The pan-European FTSEurofirst 300 was down 6.4% going into the close of the trading session, wiping off more than 500 billion euros ($582.6 billion) from the index’s total market capitalization. On Wall Street, the Dow Jones industrial average plunged more than 1,000 points after opening, but by mid-morning local time had pared its loss to just 425.75 points, or 2.6%, at 16,034.
Government bond prices, which had been rallying in anticipation of a rate cut Monday by the Bank of Israel, were disappointed by a decision to hold the rate (see separate story on this page). The government bond index both for shekel and inflation-indexed bonds edged just 0.05% higher.
Teva Pharmaceuticals, the most active share of the session Monday, dropped 5.6% to finish at 245 shekels. Bank shares, which had been badly hit, held up relatively well, although were still down 1% or more.
The biggest hits were absorbed by technology shares, with Mazor Robotics leading the TA-100 lower to fall 9% to 21.62. Compugen was down 8.2% to 18.26. Analysts said that in a slowing world economy, high-growth tech stocks are particularly vulnerable.
The few TASE-traded shares with a direct China connection also fell sharply.
Israel Chemicals, which sells fertilizers and chemicals to China, ended down 6.3% at 22 shekels. Kenon Holdings, which owns half of a Chinese auto-making venture, lost 8.7% to 53.68. Discount Investment Corporation, which has been counting on a reverse merger that would list its Adama agrochemicals affiliate in the Shenzhen stock market, fell 8.9% to 7.83 shekels.
Ratio, a partner in the Leviathan natural gas field, dropped 7.9% to 33 agorot, with the Oil and Gas index dropping 6.21% for the day.
Meanwhile, the market for new bond issues looked like it would be frozen for the time being as corporate bond prices continued falling. The Tel-Bond 20, 40 and 60 indices fell as much as 0.76% Monday, extending Sunday’s heavy losses.
Among the biggest likely casualties are Wharton Properties, the New York property developer controlled by Jeff Sutton, which had planned to sell 2 billion shekels in bonds next month, and Azrieli Group, Israel’s biggest mall developer and manager, which has a slated 500-million-shekel bond sale. Super-Sol, Harel Finance & Insurance, Mekorot, Formula Systems and Carasso Motors had planned smaller ones.
Michael Rochvarger contributed to this report.