Tel Aviv Stocks Wilted on Natural Profit-taking, Say Analysts

Weighed down by dual-listed stocks, the TA-25 dipped below 800 points but clawed back some ground

Tel Aviv stocks lost momentum throughout the day, though the negative slope eased ahead of closing. Dual listed stocks opening with negative arbitrage gaps weighed on the indexes, as did Morgan Stanley's recommendation that investors reduce their exposure to emerging markets, one of which is Israel.

The investment bank did not specifically mention Israel, but counseled the investment community to increase its exposure to the U.S. It explained that the Japanese index has risen 12% and the emerging markets index rose 16% to levels they were only supposed to reach by the end of 2006, according to Morgan Stanley's models.

The TA-25 index sank sharply: in the morning all 25 stocks had been below water but at the end, seven managed to claw back into positive territory, including three insurance companies ? Harel (1.1%), Migdal (0.9%) and Clal Insurance (1.2%). Osem also recovered, adding 2.1%, and Bezeq ended 1.7% ahead. The last but not least were Perrigo and IDB Holding, which gained 0.2% apiece.

During the session the TA-25 index dipped below 800 points, but it managed to regain some lost ground and ended 0.8% down at 806.9 points.

The last time the TA-25 index, also known as the Maof, sank that low was at the start of January 2006. Since then it spiked at 852 points, but has lost 5.6%.

In a rare show of unity, analysts shrugged at the negative trend, saying it was natural profit-taking after such sharp gains. Most suggest that the downtick presents an opportunity to buy, if anything, that foreign investors may well exploit too.

"Our market has been rising for three years straight. It's a little cashing out, so what," said one.

The TA-25 index fell 1%, halving its mid-day loss. Its closing level was 824.9 points.

None of the indexes escaped the trend. The TelTech-15 index lost 1.7%, the banks index dropped 1.1% and the real estate index fell by 1.3%.

Turnover was very heavy at NIS 1.7 billion, compared with roughly a billion and a bit in the preceding days.

Moving onto the bond arena, both linked and fixed paper edged down, by 0.1% to 0.2%. Sentiment for bonds has soured a bit in expectation of rate hikes in the U.S. and subsequently or consequently here too.

Five of the six dual listed stocks on the TA-25 index lost ground. Teva sank 1.4% on turnover of NIS 117 million, the second highest of the day. Since mid-December the generics giant has lost 12% of its value.

Teva stock

Nice Systems was hammered, losing 6.9% on lively trade of NIS 20 million, after Deutsche Bank downgraded the stock to Hold. It had no complaints about the company but said its growth is fully priced into the stock: Nice has risen 14.5% fro the start of 2006 and is approaching the bank's $55 12-month price target.

Other dual listed stocks in the doghouse were Elbit Systems, which dropped 0.3%, Koor Industries, which lost 1.6%, and Partner Communications, which sank by 1.1%.

Orckit is also dual listed and it lost 4.6%, but that's better than its mid-day level. If it's any comfort, shares in Orckit  have risen 22% this year after phenomenal gains in 2005. Turnover in Orckit was a tremendous NIS 27 million.

Ceragon sank 6.4% after reporting its fourth-quarter results on Monday. The RAD group company did beat expectations vis a vis revenues, but it also wrote off piles of inventory and some client debt, which depressed its bottom line.

Then there is Internet Gold, which ended 16.3% higher after NIS 2 million had changed hands. It reported record revenues of $17.6 million for the last quarter of 2005, and net profit  of $5.3 million.

Lipman lost 0.3% on turnover of just over NIS 10 million.