Tel Aviv Stock Exchange Plunges Post-Election Amid Political Uncertainty
Translated & summarized from Behadrei Haredim by baba
The Tel Aviv Stock Exchange has seen sharp declines since the elections, with major indices and the banking sector experiencing significant losses due to political uncertainty. Despite the downturn, foreign investors have net-purchased nearly 900 million shekels in Israeli stocks, particularly in the financial sector. Conversely, Israeli institutional investors have sold bank and insurance stocks, favoring technology and real estate companies that operate more internationally. The market remains under pressure from concerns about coalition formation and an elevated risk premium for Israel.
The story in 5 lines · by baba
- Tel Aviv Stock Exchange indices and banking sector plunged amid post-election political uncertainty.
- Foreign investors net-purchased nearly 900 million shekels in Israeli stocks since the elections.
- Israeli institutional investors sold bank and insurance stocks, favoring tech and real estate.
- Construction and insurance sectors saw declines of around 16% since the elections.
- Mutual funds experienced net sales of approximately 470 million shekels.
The Tel Aviv Stock Exchange is experiencing sharp declines, with major indices falling significantly since the recent elections. The TA-35 index dropped 2.9%, the TA-125 by 2.77%, and the TA-90 by 2.34%. The banking sector has been hit particularly hard, with a 3.4% decrease. Since the elections, which heightened political uncertainty and concerns about forming a stable government, the main indices have lost approximately 8% of their value, mirroring the bank index's decline. The construction and insurance sectors have seen even steeper drops of around 16%, as fears over the election results and potential power diffusion continue to impact trading.
Despite the market downturn, currency weakening, and political unease, foreign investors have been acting counterintuitively. Since the elections, they have purchased a net of nearly 900 million shekels in Tel Aviv stocks. An analysis by Nissan Avraham, an economist at the Stock Exchange's research unit, revealed that foreign investors bought approximately 894 million shekels in stocks between October 28 and November 4, primarily in the financial sector, which is highly exposed to local economic developments.
Of the foreign investment, about 630 million shekels went directly into financial sectors: 276 million in insurance stocks, 248 million in banks, and 106 million in financial services companies. These sectors are heavily reliant on the strength of the Israeli economy. In contrast, Israeli institutional investors, managing public pension and savings funds, took a different approach. While they bought a net of about 100 million shekels in stocks overall, they sold 137 million shekels in bank stocks and 111 million in insurance stocks.
Israeli institutional investors instead favored technology stocks, acquiring about 380 million shekels, and real estate and construction stocks, with 106 million shekels. This divergence is attributed to the operational scope of companies; many tech firms operate internationally, making them less vulnerable to domestic Israeli events. While foreign investors increased holdings in sectors directly influenced by local actions, Israeli institutions shifted resources to companies operating primarily abroad. Additionally, mutual funds saw net sales of about 470 million shekels, with significant portions in insurance and commerce/services, while exchange-traded funds (ETFs) experienced net purchases of around 43 million shekels. The ongoing political uncertainty and concerns over coalition formation continue to weigh on the market, with Israel's risk premium remaining elevated.
