Tel Aviv Stock Exchange Loses Early 2024 Gains Amid US-Iran Deal, Yet Attracts New Investments

The Tel Aviv Stock Exchange (TASE) experienced significant declines in June 2024 following the announcement and signing of a memorandum of understanding between the US and Iran. This development erased most of the market's gains from the start of the year, pushing several sector indices into negative territory for the first half of the year, according to TASE's semi-annual research report.

The TA-35 index fell 8.73% in June, wiping out about half of its 11.9% year-to-date return by the end of June. The broader TA-90 and TA-125 indices also declined sharply in June by 11.16% and 9.47%, respectively, ending the first half with modest returns of 0.28% and 9.48%. Sector-specific indices such as CleanTech and Energy Infrastructure saw steep June drops of 17.78% and 17.12%, yet maintained strong positive returns of 41.62% and 39.17% for the six months. Conversely, the Communication & IT, Oil & Gas, and Security indices, which had been market leaders during the conflict period, fell 13.75%, 8.8%, and 10% in June, resulting in negative half-year returns of 19%, 13.3%, and 3.85%.

Despite the market downturn, foreign and institutional investors increased their exposure to the local market. Foreign investors allocated approximately 764 million shekels to technology stocks, 255 million to insurance, 213 million to energy and oil & gas, and 207 million to commerce and services. However, they reduced their holdings in the banking sector by about 538 million shekels in June, continuing a trend of selling bank shares totaling 5.3 billion shekels since the start of the year.

Local institutional investors also boosted their investments by around 815 million shekels, including increased stakes in banks, insurance, and biomed sectors, while reducing real estate holdings. The influx of capital supported 15 new companies that went public in the first half of 2024, raising a combined 6.1 billion shekels out of 10.7 billion shekels raised in all IPOs during this period. Notable IPOs included construction group Tadiran, which raised 1.7 billion shekels, simulator company Gira with 855 million shekels, and Rami Levy Real Estate raising 521 million shekels.

The bond market also thrived, with 12 new bond issuances totaling 6.8 billion shekels. Bond indices benefited from the Bank of Israel's May interest rate cut of 0.25%, with expectations of further reductions. Looking ahead, investors face the challenge of balancing profit-taking with seeking new opportunities amid ongoing macroeconomic and monetary policy developments that will determine whether the market rally continues or shifts to a defensive stance.