Tel Aviv Shares Tumble Into a Bear Market

TA-100 index finished down more than 21% from its August peak amid global stock market rout.

Pedestrians pass the entrance to the Tel Aviv Stock Exchange (TASE) in Tel Aviv, Israel, on Thursday, Dec. 11, 2014.
Bloomberg

Tumbling global markets on Thursday pushed local shares down by close to 3% and turned the Tel Aviv Stock Exchange into a bear market by the most widely used definition.

The benchmark TA-25 index ended down 2.75% to end at 1,383.34 points, its lowest close in 18 months. The broader TA-100 lost 2.85% to 1,180.84 on relatively heavy turnover of 1.88 billion shekels ($480 million).

The day’s close marked a 19.5% drop for the TA-25 since it peaked in August, close to the 20% drop usually used to define a bear market. But the TA-100 ended down for the day 21.5% from its August peak.

Stock indexes worldwide fell Thursday on fears over the health of the global economy, with banking shares slumping on both sides of the Atlantic, while safe-haven 10-year Treasury yields hit their lowest since 2012.

The U.S. benchmark S&P 500 stock index was 1.5% lower and the FTSEurofirst 300 FTEU3 index of top European shares was down 3.39% to its lowest level in two and a half years. Investors fear that the negative interest rates employed by a growing band of central banks to boost economic growth are now undermining the health of banks.

“Tel Aviv’s main index is nearing bear territory as concerns over global growth and deflation mount,” Saar Golan, a trader at Bank of Jerusalem told Bloomberg News. “Israel’s biggest trading partner is the European Union and therefore it cannot escape the turmoil around the world.”

On the TASE, banks did not perform especially badly, with the TA Banking index down a relatively modest 1.7% to 1,217.09. The hardest hit sector was technology: Elbit Systems dropped 3.4% to close at 312 and TowerJazz lost 4.4% to 43.87.

Mylan plunged 18.1% to 161 shekels after said it was buying Sweden’s Meda AB for $7.2 billion in a deal that awards what the market judged to be an overly rich premium to Meda’s market value of 92%. Other blue chips were hit hard, too: Delek group dropped 5.8% to 645.50 shekels and Teva Pharmaceuticals fell 5.6% to 212.60 (see story on page 14).

Only four shares in the TA-100 ended higher, led by Nice Systems’ that advanced 2.1% to 218 shekels on a strong earnings report (see The Ticker page 14).

In the fixed-income market, the government’s 10-year shekel bond climbed 0.3% to lower its yield to 1.75%. Yields on benchmark 10-year U.S. Treasury notes hit 1.53 percent, their lowest level since August 2012, on the worries over global growth and the effectiveness of central bank policy.

The dollar strengthened more than 0.4% to a Bank of Israel rate of 3.8880 shekels while the euro gained close to 1% to 4.4002.

With reporting by Reuters