Tel Aviv Stock Exchange Drops 10% From Peak, Analysts Debate Buying Opportunity
Translated & summarized from Globes by baba
The Tel Aviv Stock Exchange has fallen over 10% from its peak, with analysts debating whether it's a buying opportunity. While historical data suggests positive returns after such drops, experts like Yaniv Pagot caution against market timing, citing current low panic levels. Others, like Kobi Segev, see attractive entry points due to reasonable valuations and positive company outlooks. The TASE's performance is influenced by global chip stock declines and local political developments.
The story in 5 lines · by baba
- The Tel Aviv Stock Exchange has fallen over 10% from its peak, entering a correction phase.
- Historical data shows positive average returns six months to a year after a 10% market drop.
- Experts caution against trying to time the market, noting current low levels of panic.
- Some analysts see attractive entry points due to reasonable valuations and positive company reports.
- Global chip stock declines and local political factors are influencing the TASE's performance.
The Tel Aviv Stock Exchange (TASE) has experienced a significant downturn, falling over 10% from its peak, mirroring a trend seen six months ago. After a two-year rally where major indices more than doubled, the market stalled in June, entering a correction phase. Despite attempts to recover, the TASE has returned to its previous low point, down 10% from its all-time high.
Previously, market disappointment over the results of "Operation "Lion's Roar" against Iran and the approach of Israeli elections were cited as reasons for the decline. More recently, the TASE has been affected by sharp global drops in chip stocks, with local semiconductor companies losing nearly a third of their value. Declines have also been seen in defense, banking, insurance, and real estate stocks, which had risen before the elections but fell afterward, indicating broad-based market weakness.
Historical data suggests that a drop of over 10% from a peak is not uncommon. According to Matan Shitrit, Chief Economist at The Phoenix Insurance Company, the TA-125 index falls by more than 10% at least once a year on average. Drops exceeding 20% (a bear market) occur less than once every four years. Historically, six months after a 10% drop, the average return has been positive at 3.6%, rising to 5% after a year. Buying at the absolute bottom has yielded average returns of nearly 27% in six months and 37% in a year.
Yaniv Pagot, VP of Trading at the TASE, cautions against trying to time the market, stating that the bottom is not signaled in advance. He suggests looking at other indicators like pessimism, increased volatility, and fund redemptions. Currently, volatility has risen but is not extreme, and the TASE fear index is at 22, not yet indicating panic. Pagot believes the current situation is not a buying opportunity, noting the absence of panic selling and fund redemptions.
Conversely, Kobi Segev, Managing Partner at Accord Investment House, views the current market as an attractive entry point. He points to continued positive company reports, new contracts, and M&A activity, alongside a 10% drop in leading indices and a 20% fall in the TA-90 index. He anticipates positive earnings reports indicating business growth and believes that second-tier stocks (TA-90) are reasonably priced, especially if a new government works for its citizens.
Tamir Fishman Investment House research department agrees that valuations are becoming more attractive but emphasizes that timing the bottom is impossible. They advise focusing on acquiring quality companies at reasonable prices and practicing patience, viewing stock market investing as a long-term marathon. They also note that larger indices like the TA-125 and global benchmarks have performed better than sector-specific indices, which are less liquid and more volatile.
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