Tel Aviv Blue Chips Drop Below 1,000

Bank stocks drag down world markets as Greece admits default is near.

Tel Aviv blue chips fell to a two-year low as bank stocks dragged down markets worldwide on fear that Greek bankruptcy is around the corner. The benchmark TA-25 index finished below 1,000 points for the first time since September 2009, following a 3.6% tumble Sunday and after losing 6.1% of its value last week.

"The market hates uncertainty and question marks," said Adi Stern, a portfolio manager at Tamir Fishman yesterday. "It isn't a sweeping panic, but total turnover [in Tel Aviv] wasn't low yesterday."

Stock Exchange - Guy Raivitz - 02082011
Guy Raivitz

In other words, Israeli investors are getting off the fence and starting to make decisions - in this case, a decision to get out.

While the Tel Aviv Stock Exchange was open on Sunday as usual, and lost ground, yesterday was the week's start for the rest of the globe, and it did not begin auspiciously. The equities selloff was driven by the admission from Greece's deputy finance minister, Filippos Sachinidis, that the country is almost out of cash.

"We definitely have maneuvering space within October," Sachinidis said in an interview on television channel Mega, responding to questions on how much longer the government would be able to pay wages and pensions. In other words, after October, Athens won't have the money to pay wages and pensions.

And that wasn't all the bad news yesterday: European bank shares went into a tailspin after Moody's announced that it would be downgrading French banks because of their heavy exposure to Greek debt.

Adding to the gloom was the failure of a weekend meeting of finance ministers from the Group of Seven industrialized nations to generate fresh proposals for boosting global growth.

Following these spasms of candor, European markets fell decisively across the board. In Israel, the TA-25 index fell 2.5% to close below 1,000 points for the first time since September 2009. In Europe the losses ranged from 1.5% in England to 2.3% in Germany to 4% in France. Scandinavian stocks lost about 3%. MSCI's all-country world equity index fell 1.5%.

Naturally the fear infected the euro, which weakened to $1.358, its lowest point in six months.

The Israeli economy may have been upgraded by Standard & Poor's to A +, at this of all times (see opinion piece by Eytan Avriel below ), but Israeli shares could not escape the wrath. While blue-chip TA-25 stocks fell 2.5% to 999.5 points, the broader TA-100 index lost the same to 898 points, bringing its loss from the start of the year to 27%.

Worst-hit among the Israeli sectoral indexes was Oil & Gas Exploration, which tumbled 6.5% yesterday - for no particular reason, Tamir Fishman's Adi Stern commented. According to Stern, there was no substantial change to warrant yesterday's loss, but the public holds enormous amounts of these shares and when the market is in retreat, oil & gas exploration shares fall too.

That said, he added, "there's as much gas in the Tamar field today as there was yesterday."

Stern sought to reinstate some proportion. In his opinion, this is a good time to pick up certain securities that have been battered, such as certain corporate bonds.

A source at the Ayalon investment bank differed, noting the escalating tensions in the region, not only including Turkey's dissociation from Israel but its threats against Cyprus over deep-sea resources in the Mediterranean. All the gas found in Israeli territory has been in the seabed. The Ayalon analysts also note that the drop by Israeli blue chips below 1,000 points has no economic significance whatsoever: It's just a psychological benchmark.

Tycoons in the doghouse

As European bank stocks bled, here, the Banks-5 index fell by 2.9% - a relatively mild drop compared with yesterday's 13.5% loss by BNP Paribas. Societe Generale said it would cut costs and sell assets to free up 4 billion euros in fresh capital yesterday, yet its shares lost more than 9%, as did stock of Credit Agricole.

For the record, Bank of France Governor Christian Noyer insisted yesterday that French banks had no liquidity or solvency problems and could withstand any crisis relating to Greece.

Doing little to dispel the anxiety over the weekend, the German representative to the European Central Bank, Juergen Stark, suddenly quit, reportedly over disputes regarding the plan to buy government bonds.

Nevertheless, although yesterday's loss by Israeli bank shares was minor relative to that rout, from the start of the year, Israeli bank stocks have lost 34% of their value.

Yesterday, the Tel Aviv Real Estate-15 index lost 3.2%. From the start of 2011, that index is down 32%.

Total turnover on the TASE was NIS 1.7 billion yesterday, higher than during the height of summer.

While investors punished bank stocks around the world, in Israel, shares associated with "the tycoons" took a special spanking yesterday. Shares of Israel Corporation - belonging to the Ofer family - lost 4.2%, bringing their loss this year to 47.2%.

Delek Group, controlled by Yitzhak Tshuva, lost 5.2% yesterday, expanding its loss this year to 42%.

Jerusalem Economic Corporation, an Eliezer Fishman group company, lost 8.4% yesterday, thus widening its loss this year to 38%. Africa Israel Investments tumbled 9.3% yesterday. It's down 53% from the start of the year.

Also in the eye of the storm were shares and bonds belonging to Nochi Dankner's IDB group of companies, after S&P Maalot changed the outlook for Property & Building to negative (for more on that story, see Page 8 ).

IDB Holding Corporation shares lost 9.5%; Discount Investment, another group company, lost 8%; Property & Building fell 6.8%; and bonds of group company IDB Development lost 0.6% to 7.6%.

On the TA-25 index of blue chips, only one stock finished in the green - Makhteshim-Agan Industries, a subsidiary of Koor, which gained 0.8%. Its parent company, Koor, from the IDB group, enjoyed no such favor: Its stock fell 5.4%.