Why Israel’s stock market is ignoring economic forecasts

Measures of the Israeli economy present a picture that seems at odds with the uncertainty created by the security events. Tel Aviv Stock Exchange indices are rising despite weak economic growth expectations for Israel, the shekel is steadily strengthening, and demand for Israeli debt is high, despite downgrades by credit rating agencies.

These and other points were discussed in the annual webinar held by Profit Finance Group, entitled “The Tel Aviv Stock Exchange Explodes”, with the participation of Executive Vice President and Chief Economist of Profit Finance Amir Kahanovitz, CEO of Victory supermarket chain Eyal Ravid, and Erez Golan, Head of the Unit. Issuing local debt at the Ministry of Finance.

The speakers expressed a high degree of optimism about the Israeli economy. “We are seeing the market repeating what it was in the past in previous security events. The market is correcting sharply. The Tel Aviv 125 index is up 24% so far this year, compared to European indices which are up 6%.” Kahanowitz said.

He added: “In my view, the biggest drama happened in the shekel.” “Between just before the war and now, its strength against the basket of currencies has risen by about 8%. Since the beginning of this year, its strength against the basket of currencies has risen by 4%.”

Kahanowitz explained that when it comes to expectations about Israel, their pessimism is focused on what is happening, not on what will happen. “When someone makes growth forecasts, he bases them on existing data, and does not take into account future events that could boost growth.” Kahanowitz pointed to the developments that occur after every military confrontation, and said that similar developments will occur once the current war ends. “In the past, Israel has succeeded in recording achievements, especially in diplomatic cooperation with other countries. Israel’s position in the world has changed, and it is able to benefit from this.”

He pointed out that the rehabilitation of the Gaza Strip requires the cooperation of European countries and the United States, and said that Israel will benefit from it. He said, “The Gaza Strip cannot be rehabilitated without Israel’s participation. Israel will know how to turn this to its advantage.”

He concluded by saying: “I am optimistic.” “I think the markets are as well. It is no coincidence that they are rising despite Israel’s weak growth forecasts. The markets are more optimistic than these forecasts. And I heard a lot of people saying: ‘Let’s withdraw our money.’ In the past that was a mistake.”

Erez Golan said that despite the credit rating reduction that Israel witnessed in the current war for the first time ever, the demand for Israeli debt remained high, both abroad and in Israel itself.

Golan explained the reasons for the increase in debt abroad while the increase in domestic debt remained strong throughout the war. “Why do we issue debt abroad? It is usually more expensive and the reason for doing so is not always understood, but I can say that we need debt collection channels that are not just local, in case something happens.”

“It is our responsibility to ensure that there is a backup plan in case we are unable to increase debt in the local market. The local market cannot always absorb the country’s needs.”

Golan stressed that in order to increase debt abroad, it is necessary to ensure that financial institutions there are familiar with the country. “It’s not easy to go and sell abroad if they haven’t seen you for years. You can’t simply come and sell debt. But because, over the years, we’ve made a point of coming to the markets, they know they’re following us, and we can do that, but that’s helped us a lot, especially In times of crisis.”

Published by Globes, Israel Business News – en.globes.co.il – on December 11, 2024.

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