Foreign Investors Buy Israeli Stocks Amid Local Caution
Translated & summarized from Ice by baba
Foreign investors purchased 894 million shekels in Israeli stocks post-election, focusing on financial sectors, while local institutional investors sold finance stocks and bought technology shares. This occurred despite a rise in Israel's risk premium, which typically falls after elections. The differing strategies highlight varied responses to political and economic uncertainty, with foreign investors showing confidence in local financial companies.
The story in 5 lines · by baba
- Foreign investors bought 894 million shekels in Israeli stocks post-election, focusing on finance.
- Israeli institutional investors sold finance stocks and bought 380 million shekels in tech shares.
- Mutual funds sold 470 million shekels in stocks, contrasting with foreign investment trends.
- Israel's risk premium rose post-election, unlike previous election cycles.
- Foreign investors increased exposure to finance despite government formation uncertainty.
Despite political uncertainty and a weakening shekel, foreign investors have injected approximately 894 million shekels into the Israeli stock market since the recent Knesset elections. Data from Nisan Avraham, an economist at the Tel Aviv Stock Exchange's research unit, indicates that between October 28 and November 4, foreign investors significantly increased their holdings, particularly in financial sectors. Of the total foreign investment, about 630 million shekels went into finance, with insurance stocks leading at 276 million shekels, followed by banks at 248 million shekels, and financial services at 106 million shekels.
This influx into finance is notable given the prevailing uncertainty about the next government's composition and economic policies. In contrast, Israeli institutional investors showed a more cautious approach, with net purchases of only about 100 million shekels. Their strategy diverged sharply from foreign investors; they sold bank stocks (137 million shekels), insurance stocks (111 million shekels), and financial services stocks (38 million shekels). Instead, Israeli institutions favored technology stocks, acquiring 380 million shekels, and real estate and construction, with 106 million shekels.
Mutual funds also moved against the foreign trend, selling 470 million shekels in stocks, including 171 million in insurance and 98 million in trade and services. Exchange-traded funds saw modest net purchases of 43 million shekels. This divergence highlights different investment strategies amidst the same political and economic landscape: foreigners favoring finance, local institutions opting for tech, and mutual funds reducing overall holdings.
Foreign investors remained undeterred by a rise in Israel's risk premium. The five-year dollar CDS spread increased by about 6 basis points in the two months before the elections and remained at a similar level afterward. This contrasts with previous election periods where risk premiums typically decreased post-election, reflecting reduced uncertainty. The current situation leaves open questions about forming a stable government and its future economic policies, yet foreign investors responded with significant purchases rather than divestment in the week following the election.
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