Market Report / Cellular Companies Drag Stocks Lower

The benchmark TA-25 index lost 0.8% to 1,113 points, and the broader TA-100 index fell 0.5% to 1,013 points.

Tel Aviv blue chips lost ground on Wednesday, pulled down by a steep drop in mobile-communications companies in late trading. In fact, Israeli shares had spent most of the session well into the green until the last-hour cellular debacle, which centered on companies belonging to Ilan Ben-Dov's business group.

The benchmark TA-25 index lost 0.8% to 1,113 points, and the broader TA-100 index fell 0.5% to 1,013 points. The banks took a hit, with the index tracking them closing 1.4% lower. Tech and biomed powered ahead, ending with gains well above 1%, but they were the exception.

Citi Bank - Bloomberg  - 26012012

Total turnover remained thin at less than a billion shekels. On trade that thin, little events can take on big significance - such as Citi frowning at Israel's wireless sector.

The story of the day, or at least the end of the day, was the cellular companies, after Citi issued an assessment of the Israeli cellular pack, setting them very low target share prices. Locals surmise that the evaluation by the foreign bank led to heavy selling by foreign investors, hence the steep losses by the cellular crew.

Suny Electronic, the company at the top of Ilan Ben-Dov's group of companies, lost 10% on turnover of half a million shekels. Suny controls Scailex, which in turn owns the controlling interest in Partner Communications: Scailex lost 6.6% and Partner itself lost 6%.

Out of the 10 bonds that lost the most in trading on Wednesday, eight belong to the Ben-Dov group. Scailex bonds B7 and B8 lost 7% to 8% in price, raising their yields as high as 20%. Suny B2 bonds fell by 4.3%, raising the field to 23%. Debentures issued by another of Ben-Dov's companies, Tao Tsuot, lost 3.3% of their value and their yields rose to triple-digit territory.

Cellcom, also in Citi's sights, lost 5% on turnover of NIS 22 million.

What happened is that Citi lowered its targets for Cellcom and Partner drastically and gave both Sell recommendations. Partner's target was hacked from NIS 53 to NIS 21.50. Ouch. Cellcom's target was cut to NIS 32.50, which is a cool 52% below its opening share price on Wednesday morning.

While Partner belongs to Ben-Dov's business group and the Citi report wreaked havoc on that group's securities, Cellcom belongs to Nochi Dankner's IDB group. Shares of IDB Holding, the company at the top of that business group, lost 5.2% on low turnover. IDB Development doesn't have shares listed for trade, but it does have bonds, which dipped slightly, losing between 0.04% to 0.7%. But shares of the IDB group company that directly owns Cellcom, Discount Investment, lost 5.5% and its bonds lost between 0.2% and 0.8% - with one exception. Discount Investment's B6 bonds gained 0.7%.

In other Tel Aviv stock market news, the session was not in fact all grim. Tech and biomed indexes finished firmly higher: The TA-Technology index gained 1.6% and the oil and gas exploration pack gained 0.4%. Certainly the European markets cannot be credited with the strength of Israeli technology on Wednesday: Exchanges there were mixed too with a negative bias.

In world markets, oil prices slipped even though the International Monetary Fund said crude could rise as much as 30% in price if Tehran really does halt oil exports, thanks to U.S. and European Union sanctions. The euro retreated as worry about Greece somehow refuses to abate.

(With reporting by Reuters and TheMarker. )