Tel Aviv Stock Exchange Surges 130% Since War's Start, Outpacing Wall Street
Translated & summarized from Maariv by baba
The Tel Aviv Stock Exchange has surged 130% since October 7, 2023, outperforming Wall Street, while the Israeli Shekel strengthened 25%. Analysts cite the tech sector, AI, and increased defense spending for the market's resilience. Ahead of elections, investors are split on the impact of the government's identity, with potential currency fluctuations and regional tension changes depending on the outcome.
The story in 6 lines · by baba
- Tel Aviv Stock Exchange rose 130% since October 7, 2023, surpassing Wall Street's 80% gain.
- The Israeli Shekel appreciated 25%, making it one of the world's strongest currencies.
- Market resilience is attributed to Israel's tech sector, AI boom, and increased defense spending.
- JPMorgan predicts up to 3% Shekel fluctuation based on election results.
- Foreign investors remain cautious, with global funds holding Israeli stocks at an all-time low.
- Election uncertainty could delay budgets, reforms, and investments, increasing market volatility.
The Tel Aviv Stock Exchange has experienced a remarkable 130% surge since the Hamas attack on October 7, 2023, significantly outperforming Wall Street's 80% rise during the same period. The Israeli Shekel has also strengthened by 25%, marking one of the sharpest currency appreciations globally. Analysts attribute this market resilience to Israel's robust technology sector, the global boom in artificial intelligence, and a near doubling of defense spending to 8% of GDP.
As Israel approaches elections, global investors are divided on how the outcome will impact its markets. Polls indicate a close race, with neither Prime Minister Netanyahu's Likud bloc nor the opposition bloc expected to secure the 61 seats needed for a majority, potentially leading to prolonged coalition negotiations or further elections. JPMorgan estimates the Shekel could fluctuate by up to 3% based on election results, suggesting an opposition victory might strengthen the currency by improving relations with Western allies and halting judicial reforms, while another Netanyahu government could weaken it.
Charlie Robertson, Economic Advisor at Equity Bank, noted that a Netanyahu re-election might increase the likelihood of escalation with Iran, whereas his defeat could be perceived as reducing regional tensions. Despite these geopolitical concerns, some investors remain optimistic about Israeli assets. Sergey Dragchev of Union Investment has purchased Israeli bonds, expressing confidence in their stability and anticipating a eventual calming of regional conflicts.
However, foreign investors are exercising caution. Data from Copley Fund Research shows a record low percentage of global investment funds holding Israeli stocks, a sharp decline since 2023. Israeli government bonds have also performed well, yielding approximately 30% over the past two years, more than double the return of major emerging market indices.
Some analysts believe the primary risk lies in a politically indecisive election outcome, prolonging uncertainty, delaying budgets, reforms, and investments. A Tel Aviv Stock Exchange study of the last ten election cycles found that volatility in leading stock indices increased by up to 45% in the weeks following votes, though initial declines were typically erased within a month, with indices averaging a 1.7% rise.
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