Market Report / Israeli Stocks Drop 1% on Nakba Day

Late-week retreat on the street and in commodities didn't help, either.

Israeli shares lost ground yesterday on thin turnover, with real estate and bank stocks ending sharply lower as Nakba Day violence shook the land.

The pullback on Wall Street and European markets as last week ended hardly helped, as speculation runs rampant that the big money is losing its appetite for risk.

More and more major market players are seeing the retreat in oil and metals prices as a signal to flee the scarier areas of the equity markets.

Exotica is out, is the word, fueled by fear that stocks and some commodities had risen more than their merit. "I think expectations for the stock market are a bit on the high side," said Ken Fisher, founder of Fisher Investments that manages about $38 billion in equities.

As last week closed, commodities were at the forefront of selling. The protracted upturn in gold, silver and oil reversed violently. Silver crashed 30% and oil wilted, losing about 15%. Is the rally over?

Depends who you ask. Corporate reports for the first quarter have by and large been positive, among Israeli companies as well. Over at Goldman Sachs and Credit Suisse, analysts counsel selectivity, suggesting that stocks with less dependence on economic cycles might outperform.

All indexes lost ground in Israel, where the day was tempered by reports of clashes between Israelis and Arabs over the anniversary of the creation of the state.

The benchmark TA-25 index fell 1% to close at 1,277 points and the broader TA-100 index lost the same, closing at 1,162 points. Bank stocks fell hard, with the index posting a 1.8% loss, and the Real Estate 15 index lost 2.1%. Total turnover was thin at NIS 1.5 billion, not the stuff of which trend changes are made.

The hardest hit was the newly launched Oil & Gas Exploration index, which tumbled 3.8%. While this is a sector characterized by intense swings in share prices, investors tend to be selective. Yet yesterday the direction was down nearly across the board. Delek Energy fell 5.7% on turnover of NIS 6.9 million and subsidiary Delek Drilling fell 4%. Cohen Development fell 4.6%, and Lapidot dropped 3.9%. The one company to escape unscathed was the Israel Opportunity partnership, which gained 5.9%.

Teva Pharmaceutical Industries gained 1.5% against the trend, possibly in a correction to its downward slide in the last few months. Also, yesterday the company, the biggest maker of generic drugs in the world, announced that AOK - the biggest healthcare organization in Germany - had given it the most out of 506 contracts to supply drugs. Teva will be supplying 152 of the 506 drugs; second is Stada, which will supply 96 drugs, and third is the Indian drug company Dr. Reddy's, followed by Sanofi and then Sandoz.

Shares of food manufacturer Strauss Group lost 1.9% ahead of the company's report due Wednesday: analysts expect it to be relatively feeble because of heavy costs on building its water business in China, among other factors.

Analysts think the international food company's results will pick up in the second half of the year, partly because of strengthening performance by its Sabra salads manufacturing outfit in the U.S. A number of analysts, including at Excellence, are holding their recommendations for the stock at Market Perform.

Among the perkiest shares on the market yesterday were Teva, turnover in which climbed to NIS 134 million. It was followed by Ratio Oil Exploration, which fell a big 6.4% on turnover of NIS 105 million. Trading was also relatively heavy in bank stocks: Hapoalim lost 1.3% on turnover of NIS 96 million and Leumi sank 2.3% on turnover of NIS 92 million.