Business in Brief: Central Bank Report Says Stocks Not Overvalued

Israel Chemicals cuts costs on weak potash market to pay dividend; Tel Aviv stocks close higher.

The Bank of Israel headquarters in Jerusalem.
Reuters

Central bank report: Stocks not overvalued

The Bank of Israel is encouraging investors to buy stocks, as stocks are not overvalued, according to a report released yesterday. The report seeks to counter views that stock prices are in bubble territory. The report, based on data from 1996 through 2014, presents a “bubble index.” According to the index, share prices were in bubble territory in 1999 and 2008, but currently they’re not. The report comes amid concerns that the all-time low interest rates have pushed stock prices into the bubble region, and when financial bubbles burst, they have negative implications for the economy at large. The researchers evaluated the value of the companies behind the stocks by examining their dividends, as well as their price-to-book value ratio. While Israeli shares have gained 446% between 1996 and 2014, there is no unilateral indication that Israeli stocks are currently overpriced, they concluded. (Shelly Appelberg)

Israel Chemicals cuts costs on weak potash market to pay dividend

Israel Chemicals (ICL) said yesterday it was reducing capital spending and planned to cut 2016 costs by another $50 million due to a weak global potash market, but still decided to pay a fourth-quarter dividend. ICL, one of the three largest suppliers of the crop-nutrient potash to China, India and Europe, had previously said it would cut costs by $350 million this year versus 2013. It said yesterday it planned to take steps to generate an additional $50 million in cash flow through improved working capital and other measures. ICL also intends to limit capital spending, excluding acquisitions, to $650 million a year over the next few years, down from a previous goal of $700-$800 million. As a result, it said, the company’s debt levels should decline moderately starting this year. It said it would pay a fourth-quarter dividend of $67 million, or 5 cents a share. (Reuters)

Tel Aviv stocks close higher 

The Tel Aviv Stock Exchange closed with gains yesterday, as the blue-chip Tel Aviv-25 Index gained 0.4% to close at 1,489 points and the broader Tel Aviv-100 Index gained 0.5% to close at 1,278 points. Shares of Israel’s cell phone companies gained sharply for the second day in a row: Cellcom gained 8.4%, while Partner gained 4.9%. Bank shares fell 0.3% amid plans by the Knesset to cap bank executive salaries. Real estate shares were up 1%. Total turnover was 1.079 billion shekels. (Shelly Appelberg)