Market Report / Shekel Gains Boost TASE, Bonds Rebound

The shekel began to strengthen three weeks ago when Bank of Israel Governor Dr. David Klein raised key lending rates by 2 percent, and continued to gain momentum. Yesterday it gained 1.4 percent against the U.S. dollar during currency trading, with a representative exchange rate set at NIS 4.67 - up 1.3 percent from Friday's official daily rate.

Since the bond market crisis when the shekel-dollar exchange rate reached NIS 4.982, the dollar has slipped 6 percent in local trading.

The sharp drop in the dollar's value will bring down future consumer price indices and shekel bonds continued to post handsome gains yesterday. Long-term Shahar 2680 series fixed-interest bonds gained 0.9 percent. Since the height of the crisis on June 23 the 2680 bonds have gained 19 percent.

Dollar-linked Gilboa bonds dropped 0.8 percent yesterday, Gilboa prices have been dropping since June 10 as their yields rise. Annual yields on Gilboa bonds are now in the 4-5.5 percent range.

Market players attribute the continued shekel strength to the relative calm on the security front; an easing of prevailing economic uncertainty; treasury declarations of widespread cuts in the 2003 state budget; and expected difficulties for private legislation.

Mid-month conversions for value added tax payments by businesses also usually boost the shekel. However, many were asking themselves exactly what what happened yesterday to boost the local currency.

One reason for the substantial gain is of course the dollar's weakening global position. The euro yesterday crossed the psychological 1:1 barrier for the first time in two and half years. The dollar hit a 10-month low against the Japanese yen two days ago and continues to loiter close to recent lows against European currencies.

Last week the dollar also hit a 26-month low against the British pound and Wall Street's tough times have only added to its negative momentum.

Tel Aviv Stock Exchange continued to climb yesterday as well with the Maof-25 blue chip index closing up 1 percent to 377 points and the TA-100 gaining 0.94 percent. Turnover was middling at NIS 270 million.

Bank shares continued to stand out as the two major banks, Bank Hapoalim and Bank Leumi, gained 2.4 percent and Mizrahi climbed 0.4 percent. The IDB group posted attractive gains as Clal Industries climbed 3.5 percent and Discount Investments added on 2.6 percent.

One share hit by the shekel revaluation was Israel Chemicals which shed 2.8 percent on NIS 8 million turnover yesterday.

Teva Pharmaceuticals (Nasdaq: TEVA) continued to attract a great deal of attention as it slid 0.4 percent on NIS 33 million turnover.

Notable medium-sized shares included Phoenix's 4.5 percent gain on little turnover and Union Bank which gained 3.2 percent, as well as Suny posted a 3 percent advance.