Market Report / Stocks Drop on Europe, Egypt

Losses followed Egypt's decision to cancel the natural gas export contract with Israel, and amid mounting fears about Europe's debt crisis (again).

Stocks on the Tel Aviv Stock Exchange dropped sharply on Monday, losing up to 1.5% during trading. The losses followed Egypt's decision Sunday to cancel the natural gas export contract with Israel, and came amid mounting fears about Europe's debt crisis (again).

Shares around the world slumped as disappointing euro zone private sector data and a Dutch budget crisis unnerved investors, who scooped up perceived safe-haven assets such as the dollar and U.S. Treasuries. European shares fell to a three-month low as worsening global economic conditions and political uncertainty in France and the Netherlands threatened to deepen the euro zone's crisis. Wall Street opened with losses of more than 1%.

While international shares were weighted down by rising returns on Spanish government bonds and the French elections, Israeli shares had their own additional woes from Egypt.

The blue-chip Tel Aviv-25 Index fell 1.2% to close at 1,148 points, and the broader Tel Aviv-100 Index also fell 1.2%, closing at 1,055 points. Total turnover was a paper-thin NIS 735 million.

Taking a particularly strong hit was Ampal, a partner to the gas deal with Egypt. Its share fell 19% on unusually high turnover of NIS 532,000, up from its average of NIS 86,000. The company's bonds also plummeted by 10% to 37%, pushing their returns up, to 50% to 350% (for bonds, high returns are a bad thing ). Businessman Yossi Maiman holds 12.5% of Egyptian gas exporter EMG through Ampal.

The Egyptian gas supply has been interrupted for more than a year now, since the revolution in Egypt. Ampal lost 83% of its value over the past year, and is now trading at a market cap of only NIS 50 million.

Egypt's move is likely to strengthen local gas companies, such as the partners in the Tamar gas reserve, including the Delek Group, said analysts. Delek lost 2.1% on Monday.

Other companies whose stocks lost on the Egyptian gas news included Israel Chemicals, whose share was down 3%. Its subsidiary Dead Sea Industries signed a contract to buy 200 million cubic meters of gas from EMG at the end of 2010.

In non-gas news, IDB is still looking for cash. Subsidiary IDB Development is in advanced negotiations with Menora Mivtachim and the Bereshit Fund to receive NIS 300 million in loans. IDB Development lost 0.3% yesterday, while the parent company lost 1.6%. Menora lost 2.2%.


With reporting by Reuters.