Market Report /Israeli Stocks Flat as Multiplying Uncertainties Paralyze Investors

Israeli stocks finished a quiet day yesterday on tiny turnover, about half the average daily volume of trade last year. It wasn't the upcoming Shavuot holiday or sultry weather that kept investors away, but rather a spate of uncertainty, reported Daniel Rapoport, head of international trading at the Excellence Nessuah international equities desk.

"There are a number of factors deterring people from the market these days," Rapoport told TheMarker last night. Not only Israelis but foreign investors are leery of broadening their holdings in Israeli equities these days because of the geopolitical situation, which is a huge uncertainty factor, he explained. Not only is the region in upheaval: a second flotilla is expected to leave Turkey for the Gaza Strip in a couple of weeks, not exactly the sort of event that attracts investors in droves.

Wall Street - Bloomberg

Then comes September, when the Palestinian issue will likely be discussed at the United Nations, adding yet more fuel to the fire of uncertainty, Rapoport said. "People aren't looking for risks they don't need."

To keep things in proportion, it isn't only in Israel that trading turnovers are low. Uncertainty is plaguing the entire global marketplace, according to the analyst.

"The markets are pretty indecisive," he said. "Investors are asking questions very broad in scope, in respect to the state of the European economy, in respect to economic recovery in America, where the most recent statistics have been weak."

Investors have scaled back their risk - such as investments in relatively high-risk vehicles like stocks, and feel comfortable where they are now. Why seek adventures in Israeli shares given the multiple uncertainties of global markets in general and the local region?

In Israel, local and foreign investors have to factor in the element that interest rates are rising, Rapoport added. The higher interest rates are, the more attractive "risk-free" assets such as bank deposits become, to the detriment of share prices.

While Israeli stocks changed little on wee turnover yesterday, in most of Europe and over on Wall Street equities continued to slog south. In New York it was the fifth week of losses as signs multiply that the American economy is slowing.

A mere 54,000 jobs were added in May, a third of the anticipated number, and unemployment climbed to 9.1%, according to a report released Friday. Among the dogs of the Dow yesterday were bank stocks: Citigroup fell 3%. While British stocks managed to eke out small gains, losses elsewhere in Europe ranged from 0.3% in Germany and Amsterdam to 2.2% in Stockholm. Stocks in France lost 0.7%.

Stocks in Israel were mixed with a negative bias on total turnover of NIS 1.1 billion. "It was a particularly sluggish session, both for stocks and for derivatives," said Ziv Pnini, head of the Migdal Capital Markets trading room. "The big investment managers see no reason now to make changes in their holdings."

The benchmark TA-25 index lost 0.1% to 1,229 points and the broader TA-100 index finished flat with a slightly negative bias at 1,118 points. Tech and biomed stocks ended in the green and the oil and gas pack gained 1.1% for the day.

While on that index, a closer look shows intense selectivity. Delek Energy gained 4.7%, becoming the top gainer for the day, and Delek Drilling and Avner gained 3.6%. The rest were largely negative, with the hardest hit being the Israel Opportunity partnership, which lost 3%. Among yesterday's movers in Tel Aviv were Bank Hapoalim, which lost 0.7% on small turnover of NIS 62 million, and Ratio Oil Exploration, which went nowhere on turnover of NIS 47 million.

Israel Chemicals was among the losers, down 2% yesterday on turnover of NIS 42 million.