Tel Aviv Stocks Surge While Wall Street Falls, Raising Arbitrage Concerns
Translated & summarized from Maariv by baba
Tel Aviv stock indices surged by up to 5.1% last week, while U.S. markets like the Nasdaq fell by 5.5%. Concerns are emerging over negative arbitrage gaps in dual-listed Israeli stocks due to the U.S. market's weakness. The Israeli Shekel also weakened against the dollar, which rose 1.1% locally. The Bank of Israel is expected to keep interest rates unchanged at its upcoming meeting.
The story in 5 lines · by baba
- Tel Aviv stock indices rose 4-5.1% last week while the Nasdaq fell 5.5%.
- Construction and real estate stocks led the gains on the Tel Aviv Stock Exchange.
- Negative arbitrage gaps in dual-listed stocks are a concern for the Israeli market.
- The Israeli Shekel weakened against the dollar, which rose 1.1% locally.
- The Bank of Israel is expected to hold interest rates steady at 3.25%.
The Tel Aviv Stock Exchange experienced a significant rally in the past week, with its main indices showing gains of approximately 4% to 5.1%. This surge contrasts sharply with a downturn in the U.S. market, where the Nasdaq 100 index dropped by 5.5% and the S&P 500 fell by 1.9%. European markets saw more moderate gains, with the German DAX up 2.1% and the French CAC up 2%.
In Tel Aviv, construction and real estate stocks led the advance, with weekly increases of around 9.7% and 9% respectively. The banking and insurance indices also performed well, rising by approximately 5.5% and 5.2%. The local technology sector, however, lagged, with a modest gain of about 0.7%, highlighting sector-specific performance differences within Israel.
Concerns are now being raised about negative arbitrage gaps in dual-listed stocks, where the price difference between overseas and Israeli trading could create downward pressure on opening prices. Companies like Palo Alto Networks, Tower Semiconductor, Nova, and Nice are noted as having significant negative arbitrage gaps ranging from 2.2% to 8.2%.
Meanwhile, the Israeli Shekel weakened against the dollar, which strengthened by about 1.1% against the Shekel in the past week, reaching 3.089 Shekels. This occurred even as the global Dollar Index (DXY) weakened by 0.4%. The Shekel also depreciated against the Euro and the British Pound.
Looking ahead, the Bank of Israel is expected to announce its interest rate decision on October 21st. The market widely anticipates the rate will remain unchanged at 3.25%, following four previous cuts. Investors will be closely watching the central bank's forward guidance for clues on future rate adjustments.
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