Tel Aviv Shares Tumble Amid Trade War Worries

Local analysts, however, see little downside risk ahead

FILE PHOTO: A man enters the Tel Aviv Stock Exchange, in Tel Aviv, Israel January 29, 2017.
\ Baz Ratner/ REUTERS

Shares on the Tel Aviv Stock Exchange tumbled on Sunday as the worsening U.S.-China trade war undercut Wall Street on Friday and uncertainty continued over U.S. policy.

The TASE’s benchmark TA-35 dropped 3.2% to end the day at 1,543.59 points, its lowest close since June 12. Although the index is still up 5.45% for the year it has shed 5.4% since the start of this month.

Among the biggest drops for blue chip stocks was Israel Chemicals, which does significant business with China, falling 4% to 15.81 shekels ($4.50). Dual-listed shares were also hit hard, with Elbit Systems down 4.3% to 548.80 and Opko Health off 6.7% to 6.48. Bank shares were sharply lower, with Hapoalim falling 2.5% to 25.58 shekels.

Ori Greenfeld, chief economist at Psagot Investment House, said world markets were taken by surprise by Beijing’s announcement on Thursday of retaliatory tariffs against about $75 billion of U.S. goods.

But many market experts discounted the significance of the drops. Gilad Altshuler, one of two partners in the Altshuler Shaham Investment House, attributed the nervousness in Tel Aviv and other markets to passing uncertainty.

“We’re seeing a process of constant declines in yields in the bond market, which means the alternative [to investing in stocks] is getting smaller. Investors will have no choice but to return to the stock market,” he said.

Davidi Reznik, an interest rate strategist at Leumi Capital Markets, said he expected the uncertainty surrounding the trade war would continue until at least the November 2020 election in the United States. He said that for now the global services sector, most notably retail, wasn’t suffering any fallout, but manufacturing is feeling the pinch.

“If the global slowdown continues, mainly the export sector will be affected,” he said, “but so far we have not seen an impact on Israel. Economic growth has been around 3%, and there is a potential for growth in relation to expectations, with exports from the Leviathan gas reservoir.”

Israeli shares will likely remain volatile, but prices right now are “reasonable,” so that the downside risk is minimal.

In foreign currency trading on Friday, the dollar and the euro both lost about 0.4% to representative rates of 3.511 and 3.8854 shekels, respectively.