Tel Aviv Shares Plummet as Coronavirus Fears Grip Market

Institutions unload stock after they are hit by a wave of redemptions, as Delek Group leads fall on plunging global oil price

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An Israeli man wearing a mask chats with paramedics wearing protective suits in Haifa, Israel March 2, 2020.
An Israeli man wearing a mask chats with paramedics wearing protective suits in Haifa, Israel March 2, 2020. Credit: AMMAR AWAD/ REUTERS

Shares on the Tel Aviv Stock Exchange tumbled in heavy trading amid growing fears of the coronavirus’ toll on the world and Israeli economies. Delek Group led a sharp drop in energy stocks, plunging 31% by close.

Selling pressure caused the TASE to open six minutes late and the benchmark TA-35 index fell as much as 6.7% by noon. It closed off its lows but still finished the day down a steep 4.8% at 1,464.57 points, its lowest since January 2019. The broader TA-125 index was off 4.6% at 1,412.32. Only five of its component stocks showed rises for the day.

Market sources ascribed Sunday’s drop to an unnamed institutional investor or investors selling to meet redemption orders from clients. They said mutual fund redemptions alone had reached as much as 2 billion shekels ($570 million).

“In the last few hours an institution, or a number of institutions, have been selling in panic to anyone who will buy, without any discretion,” said one source, who asked not to be named. “They’re in a panic about liquidity. The market is acting like a knife is falling on it and it looks like it will continue falling.”

The fall in the TASE comes after a big sell-off in share markets overseas Friday, when the TASE is closed. On Wall Street, the S&P 500 index posted its 10th decline in 12 sessions as moves to contain the virus crippled supply chains and prompted a sharp cut to global economic growth forecasts for 2020.

Since its record closing high February 19, the S&P 500 has lost more than 12%. The TA-35 is down 16% from its February 2 record.

Markets sources characterized Sunday’s selling as broad, without any consideration for which companies and sectors face a real threat from the new coronavirus.

Data from China and South Korea show a promising winding down of the epidemic, and in Israel the number of cases is growing slowly, suggesting the situation is under control. But investors have chosen to focus on Europe, where the number of confirmed cases continues to rise, said market sources.

Sabina Levy, head of the research department at Leader Capital Markets, pointed to remarks by the prime minister and the health minister suggesting there might be a further escalation in the virus in the coming days and stricter government policies aimed at containing the local outbreak.

Delek, the energy group controlled by Yitzhak Tshuva, lead blue chip shares lower. It closed down 30.8% at 192.50 shekels, marking a 73% drop since the beginning of January.

The yield on its bonds Thursday rose 10%-18.5% Thursday, at junk levels, after falling sharply the previous four days on concerns it will have difficulty repaying debt.

Delek felt the brunt of the market’s concerns about falling world energy prices as the coronavirus slashes demand. Oil prices plunged over 8% Friday to the lowest levels since mid-2017 after OPEC plans for deeper supply cuts were derailed.

Delek Drilling, the Delek unit holding the group’s Israeli natural gas interests, finished down 13.8% at 4.31 shekels. Navitas Petroleum lost 21.% to 11.41 and Ratio 19.1% to 1.15. The TASE Oil and Gas index closed 14.3% lower.

Travel and tourism stocks plummeted as the coronavirus left airlines suspending flight for lack of passengers. El Al Airlines lost another 5.7% to 68 agorot after it warned that its decline in revenue for January-April would be $140 million to $160 million, more than double its previous estimate. Dan Hotels fell 6.8% to 24.55 and Isrotel 6.1% to 47 shekels.

Another sector to be hit hard was finance. The Insurance index fell 7.2%, led by a drop of 10.9% for Phoenix and 10.1% for Clal. The Banking index finished 5% lower as Bank Hapoalim lost 6.4% to finish the session at 24 shekels.

Even Elbit Systems was trading lower, falling 1.8% to 491 shekels, despite a report by DefenseWorld.net that it had won a $472 million contract from the U.S. Air Force.

On the other hand, Opko Health soared 44.4% to 79.5 Sunday after the company announced that its BioReference Laboratories unit will offer a coronavirus test. BioReference said it expected to begin providing testing this week at its network of patient service centers.

Reuters contributed to this report.

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