Market Report / Tel Aviv Blue Chips Drop 2% After Solid Start

TA-25 index lost 2% to 1,068 points, and broader TA-100 index fell 1.8% to 971 points. The only leading index to beat the trend was the Tel-Bond 20 index, which gained 0.3%.

Israeli shares lost 2% yesterday after starting the session with a bang. Stocks steadily lost ground throughout the day, aping European markets. The session was marked by intense selectivity on low turnover of less than NIS 1.3 billion, which means most players were on the fence and the ones making moves had clear ideas.

The benchmark TA-25 index lost 2% to 1,068 points and the broader TA-100 index fell 1.8% to 971 points. The only leading index to beat the trend was the Tel-Bond 20 index, which gained 0.3%.

In Europe too, markets started with a bang and ended with a whimper, though the losses were not substantial. Germany's benchmark DAX lost 0.6% and UK shares eased 0.3%. Madrid shares fell 0.8%. Stockholm was the only major market over the flatline, but just barely.

The uncertainties are so intense that gold, while edging higher yesterday, did so in thin trading ahead of a European Central Bank policy meeting and a European summit on the debt crisis.

In Tel Aviv the Banks-5 index started the session with a gain of 2% and ended 3% down. Thus went the day.

"Turnover is so low you could take a loan from a bank and use the money to bring down its stock," quipped Shmuel Platnick, head of the Israeli shares trading desk at Bank Hapoalim.

Why the liquidity crunch on the Tel Aviv Stock Exchange? Partly because institutional investors have left the building. "All the big institutional investors are keeping their eyes on what's happening outside," Platnick says. "For months they've confined their buying to overseas. Foreign entities are also long gone." They have left the floor open to arbitrage players, Platnick adds.

Cellcom lost 0.5% and Partner Communications dropped 3.2% the day after retail baron Rami Levi launched Israel's first mobile virtual network operator, conveniently called Rami Levi Communications. As in the case of his supermarket chain, Levi vows to undercut the competition. Yet Rami Levi Shivuk Hashikma, his retail outfit, succumbed to the trend and lost 0.6% yesterday.

Teva Pharmaceutical Industries gained 0.5%, perhaps on a Deutsche Bank report saying that two weeks after the Israeli generic drug giant acquired Cephalon, it jacked up prices 25%. Deutsche repeated a Buy rating for Teva. Its price target is $46, which is 15% above the stock's trading price yesterday.

Protalix clawed back some ground, gaining 4.2% after its 23% slide on Tuesday, following its not terribly dramatic announcement that the U.S. Food and Drug Administration would meet on its flagship drug Uplyso in May, not February.