Market Report / TASE Declines Ahead of Revision in Exchange Indices

The benchmark Tel Aviv-25 index declined by 1.1% on Thursday, closing at 1,230.88 points, while the Tel Aviv-100 was off by 1.3%, ending the trading day at 1,082.90.

Thursday was the last day of trading in Tel Aviv before the index composition review - through which the exchange adjusts the companies that make up its various indices - takes effect. The impending change brought about a sharp drop in share prices toward the end of trade Thursday, following more moderate declines earlier in the day.

Trading in Tel Aviv was also conducted against the backdrop of general disappointment over a speech Wednesday by U.S. Federal Reserve Chairman Ben Bernanke in which he talked about the impending "fiscal cliff" that would raise the American taxpayer's tax bill and cut U.S. government spending. Bernanke also discussed an expansion of the Fed's bond-buying program.

The benchmark Tel Aviv-25 index declined by 1.1% on Thursday, closing at 1,230.88 points, while the Tel Aviv-100 was off by 1.3%, ending the trading day at 1,082.90. Trading volume was very brisk at NIS 2.47 billion - attributed to the impending revision to the indices. For the week, the TA-25 index gained 0.12%.

On the bond front Thursday, the Tel Bond indices were substantially unchanged, and government bond trading was also stable. Unlinked 10-year government bonds traded unchanged with a redemption yield of 4%. Bonds issued by Nochi Dankner's IDB Holding declined somewhat Thursday on news that Psagot, the country's largest investment firm, was pulling out of the group representing IDB Holding bondholders. The move was due to dissatisfaction over an interim payment-rescheduling agreement with Series Dalet (B4 ) bondholders. The bonds dropped by 3.7% Thursday and were trading at redemption yields of 54%. Psagot will remain on the committee representing bondholders of subsidiary IDB Development Corporation.

The Banks-5 index dropped 1.5% Thursday, but is still up an impressive 50% since its low point in August. The Real Estate-15 index fell by 1.7%.

Shares in Teva Pharmaceutical Industries dropped by 3.4% on Thursday, closing part of its arbitrage gap in relation to American trading after dropping 5.6% in the United States on Wednesday. The decline in the company's stock followed general disappointment with the announcement of Teva's strategic plans for next year. (See additional Teva coverage on this page. ) Also notable among the declines Thursday in Tel Aviv was Bank Leumi, whose stock fell 3.1% on news that the Israel Securities Authority was imposing a NIS 4 million fine on the bank and its wholly owned subsidiary Leumi Finance over the timing of an earnings warning just days after a bond offering.

Among the shares that saw gains Thursday was Kamada, which rose by 3.5% in unusually active trading in advance of an offering on the Nasdaq exchange. Among other gainers in Tel Aviv Thursday was PhotoMedex, which is dual-traded, and gained 2.9% here on an upward revision of its earnings outlook.

The U.S. Federal Reserve, in announcing a new round of monetary stimulus, took the unprecedented step Wednesday of indicating interest rates would remain near zero until unemployment falls to at least 6.5%. It was the latest in a series of unorthodox measures taken by central banks around the world to battle erratic, subpar recoveries from the financial crisis and recession of 2007-2009. The Fed expects to hold rates steady until its new threshold on unemployment is reached, as long as inflation does not threaten to break above 2.5% and inflation expectations are contained. The Fed also replaced an expiring stimulus program with a fresh round of treasury debt purchases.

The U.S. central bank previously said it expected to hold rates near zero through at least mid-2015, but policy makers were uncomfortable making a pledge based on the calendar rather than on economic goals. "By tying future monetary policy more explicitly to economic conditions, this formulation of our policy guidance should ... make monetary policy more transparent and predictable to the public," Bernanke told a news conference.

Fed officials believe the new framework should help financial markets assess incoming data in a way that helps them better guess where monetary policy is heading. The Fed is now engaged in an open-ended program of asset purchases, which it bolstered on Wednesday.

Reuters contributed to this report.

Reuters