Israel's Central Bank Cuts Interest Rate, Boosting Real Estate Stocks

Israel's central bank unexpectedly lowered its benchmark interest rate by a quarter percentage point to 3.25%, a move that immediately boosted the stock market, particularly real estate developers. The Tel Aviv Stock Exchange's real estate index rose 1.6%, with companies like Shikun & Binui, Danya Cebus, and Aura seeing significant gains. This decision comes amid a broader market upturn, with the Tel Aviv 90 index climbing 2.6% and the Tel Aviv 35 index showing modest gains.

The rate cut is seen as a strategic move by the Bank of Israel to influence the shekel's exchange rate. By lowering domestic interest rates while U.S. rates remain higher, the bank aims to make holding shekels less attractive, potentially slowing capital inflows and encouraging dollar purchases, thereby weakening the shekel. This could help Israeli exporters facing profitability pressures. However, concerns remain about the global debt market turmoil and its potential impact on Israel.

In the real estate sector, sales figures for public developers in the second quarter showed a 36% increase compared to the first quarter, with 1,571 apartments sold. Despite this improvement, sales remain about 2% below the average of the past 12 quarters, indicating underlying weaknesses. Only five out of 17 companies exceeded their own average sales pace.

Separately, the article touches on the performance of various companies. STG (Astigi), a defense sector supplier, is highlighted for its potential despite recent profit declines. Amot Investments' CEO noted strong demand for mid-range apartments but stagnation in the luxury market. Palo Alto Networks reported better-than-expected earnings but a slower-than-anticipated growth forecast for its next-generation recurring revenue, impacting its stock. Delek Group's value has grown significantly, with potential for further expansion.

In other financial news, Discount Bank is financing renewable energy projects for PowerGen with approximately 1.1 billion shekels. Autonomous Guard secured a new order worth about 2.5 million shekels from the Ministry of Defense for its subsidiary's products, following a period of weaker financial results.