Foreign Investors Weigh Israeli Election Impact on Shekel, Markets
Translated & summarized from Calcalist by baba
Foreign investors are analyzing the potential impact of Israel's upcoming elections on its currency and markets. JPMorgan predicts up to a 3% fluctuation in the shekel, with an opposition win potentially strengthening it and a Netanyahu victory weakening it. While some anticipate improved regional stability and economic resilience, others note the war's high economic cost and a historic low in foreign holdings of Israeli stocks. Some investors are looking at regional assets, like Lebanese bonds, as a proxy for potential de-escalation.
The story in 5 lines · by baba
- JPMorgan forecasts up to 3% shekel fluctuation based on Israeli election outcomes.
- An opposition win could strengthen the Israeli shekel and stock market, analysts suggest.
- Regional tensions and Iran escalation are key concerns tied to election results.
- Foreign holdings of Israeli stocks are at a historic low, data shows.
- Some investors see opportunities in Lebanese bonds linked to regional de-escalation.
Foreign investors are closely watching Israel's upcoming elections, with some anticipating that an opposition victory could boost the Israeli stock market and the shekel. Investment bank JPMorgan estimates that election results could cause currency fluctuations of up to 3% for the shekel. The bank suggests that an opposition win, potentially improving relations with Western allies, might strengthen the Israeli currency, while a government led again by Benjamin Netanyahu could weaken it.
Concerns about regional escalation are also a factor. Charlie Robertson, Chief Economic Advisor at Equity Bank, noted that the election's impact on the region is a significant question. He indicated that a Netanyahu reelection might increase the chances of further escalation with Iran, whereas his defeat could signal reduced tensions.
Billionaire Bill Ackman suggested that a government without ministers Itamar Ben-Gvir and Bezalel Smotrich would signal a "new chapter" for Israel, potentially aiding its international standing and the expansion of the Abraham Accords. However, not all foreign investors foresee negative consequences for Israeli assets if Netanyahu remains in power. Sergey Dragachev from German investment firm Union Investment stated he is buying Israeli bonds, believing the economy and companies will remain resilient. He expressed a positive outlook on Israeli bonds, anticipating a eventual calming of regional conflicts.
Despite recent gains in the Israeli stock market, foreign investors remain cautious. Data from Coply Fund Research shows that global funds holding Israeli stocks are at a historic low, having fallen sharply since 2023. Christopher Granville of TS Lombard highlighted the substantial economic cost of the ongoing war, estimated by the Bank of Israel at over $55 billion by last year.
Some foreign investors see opportunities beyond Israel. Jean-Charles Sambour of TT International believes an opposition victory or a weakened Netanyahu government could reduce regional tensions, benefiting Lebanese bonds. He suggested that Lebanese bonds are a good indicator for investors looking to gain exposure to such a scenario in the Middle East.
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