Market Report / Bond Investors Collect the Booty

Yesterday's Tel Aviv Stock Exchange session was a microcosm of all the external problems investors on Israel's financial markets have faced in the past two years. First there was an unusual security event - the assassination of a leading Hamas activist - which could lead to a political deterioration, and then there was the continuing crash of New York markets, which also brought down Asian and European markets.

In addition, the dollar gained on the euro worldwide and the Finance Ministry made new declarations and projections regarding the economic crisis and increased unemployment.

Unlike their behavior of recent weeks, the local bond and currency markets acted as expected yesterday and posted drops. TASE indexes slid ever further throughout the day, and the bond market kept up the previous day's negative momentum, with fixed-interest bonds posting drops.

The Maof-25 blue chip index dropped 1.76 percent by the end of trade to 378 points, while the TA-100 closed down 1.55 percent. Local currency trade emphasized the gap opening between the euro and the dollar globally, as the dollar gained 0.6 percent and the euro slipped 1.2 percent. The political and security ramifications of Monday's assassination also significantly influenced currency trade. Even after the representative dollar/shekel exchange rate had been set, the dollar continued to gain ground and traded at NIS 4.675.

The shekel bond market, which has attracted a lot of interest in the past few weeks, continued to fall yesterday as the weakening shekel affected trade. The dollar gain in local trade increases the inflation rate, thereby decreasing the gap between effective interest and the interest paid on fixed-interest Shahar bonds, making them less attractive. Also, investors who picked up Shahar bonds at their late-June nadir have made 10 and 20 percent capital gains, so the drops of the past few days may just be profit-taking.

Despite yesterday's drops, Tel Aviv markets have not yet responded to the global markets' substantial drops of the past few weeks. European and U.S. markets are at five-year lows, and while the TASE has climbed they have plummeted by 30 percent.

Capital market players continue to claim stubbornly that major entities preparing for tomorrow's Maof options expiry are artificially boosting the market. Others note that major players, including big insurance companies, have invested not insignificant sums in keeping share prices up because of their losses on overseas markets. Turnover, which has doubled recently, indicates that an additional NIS 1 billion has been pumped into the market for the purpose.

Not a single Maof company posted a gain yesterday. Particularly sharp drops were recorded in the IDB group with Discount Investments dropping 3.3 percent, IDB Development and IDB Holdings falling by more than 3 percent each, and Clal Industries shedding 2 percent. Koor dove 4 percent. Major banks Leumi and Hapoalim took sharp hits, with Leumi down 2.3 percent and Hapoalim off 2.8 percent. Teva Pharmaceuticals (Nasdaq: TEVA) saw the market's highest turnover at NIS 57 million on a 1.9 percent slide.