Market Report / Real Estate Stocks Tank on Wilting TASE

Tel Aviv stocks fell hard Wednesday, in the first trading day following the Sukkot break.

Tel Aviv stocks fell hard Wednesday, in the first trading day following the Sukkot break. Blue chips lost more than 3%, but the story of the day was real estate stocks, which sank like stones on heavy turnover.

Africa Israel Properties sank by nearly 13% and its parent company, Lev Leviev's Africa Israel, lost 8%. Alony Hetz ended down nearly 9% and Yitzhak Tshuva's Delek Real Estate lost 17% and counting. Gazit lost 11% and its subsidiary Gazit Globe fell by more than 6%. Housing & Construction, and Jerusalem Economic Corp, each lost more than 11%.

After a choppy session, the TA-25 index had lost 3.3% and the TA-100 index was down 3.7%, dragged down by a sharply negative opening on the other side of the world. As local investors filed their last orders, the Dow Jones was down 3.5%.

Total turnover was normal to heavy, at about NIS 2 billion for the day.

Last Friday, Citi (formerly known as Citigroup) upgraded its recommendation for the Israeli capital market in its emerging markets portfolio from Underperform to Neutral. Israel can be considered a defensive play, says Citi - especially noting the sheer weight of Teva Pharmaceutical Industries, which is a classic defensive play.

While trading in Israel rested for Sukkot, elsewhere in the world markets were mixed to positive as governments continued to throw money at the global financial markets. Paris poured $14 billion into local banks, London and Germany are nationalizing major banks, the Netherlands bailed out ING, Switzerland injected $9 billion into UBS, and the list goes on. Iceland, well, it's cold there, while Argentina trembles on the brink of a second default.

But all eyes are on America, where the leadership is trying to promote a Gordon Brown-like package that would include $150 billion in incentives. U.S. President George Bush and U.S. Federal Reserve chairman Ben Bernanke have come on board with the idea, after initial opposition.

Over here, the government isn't ruling out buying the banks if necessary. But that would be the tail-end of a contingency plan that begins, if necessary, with either guaranteeing loans made by the banks, or lending the banks enough capital to enable them to increase their lending by some NIS 80 billion.

So, how did bank stocks do yesterday on that news, which the market learned yesterday morning? Terribly. All the indices did. The Finance-15 index sank by 5.2%, dragged south by Discount Bank, which lost 5.6%, Bank Leumi, which lost 4.6%, and Hapoalim, which lost 6.1%. Union Bank sank by more than 7.7%. The fact that Deutsche Bank issued an upbeat report on Israel's banks, and upgraded Mizrahi-Tefahot to a Buy, didn't help at all. Mizrahi lost 5.8%.

Insurance companies also listed on the index did badly too: Harel lost 7.4% and Migdal, the biggest of the lot, lost 3.2%.

Teva Pharmaceutical Industries stood out from the pack with a 3.3% gain, after announcing United States Food and Drug Administration approval for its copycat version of a painkiller patch, Fentanyl. Twelve-month U.S. sales of the drug ending on June 30 totaled $1.2 billion.

Moving from drugs to chemicals, Israel Chemicals dived by more than 9%, lowering its market cap to less than NIS 46 billion. At its peak the potash provider had been worth a hair over NIS 100 billion. Turnover in the stock was almost NIS 300 million. Why the sharp retreat? Peer companies had clawed back ground on Monday: Mosaic gained 9% in the last two days and Agrium rose 4.5%, while the benchmark of the sector, Potash Corporation of Saskatchewan, did lose ground, but only 1% of it. Whatever the reason for the local negative sentiment, shares of ICL's parent company Israel Corporation also took a hammering, losing 9.5%.