Tel Aviv Stock Exchange Ends Week Mixed Amid AI Fears and Rate Hold
The Tel Aviv Stock Exchange experienced a mixed trading week, with the TA-90 index gaining 2.1% while broader indices declined, largely influenced by a downturn in the technology sector due to AI spending concerns. Local institutional investors increased their stock purchases, particularly in tech, while foreign investors sold off tech holdings. The Bank of Israel held interest rates steady at 3.25% amid inflation worries and political uncertainty, despite strong economic growth forecasts. The upcoming week features elections in Israel and key global economic decisions.
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- Tel Aviv Stock Exchange saw mixed trading, with TA-90 up 2.1% and TA-35 down 2.4%.
- Technology sector fell 3.7% due to concerns over AI spending and returns.
- Local institutions bought NIS 399 million in stocks, favoring tech, while foreign investors sold.
- Bank of Israel held interest rates at 3.25% despite strong growth forecasts.
- Israel's economy is projected to grow significantly in 2026 and 2027.
- Upcoming week includes Israeli elections and global central bank rate decisions.
The Tel Aviv Stock Exchange concluded a mixed trading week, with the TA-90 index rising approximately 2.1% while the TA-35 and TA-125 indices fell by 2.4% and 1.4% respectively. The technology sector was a focal point, experiencing a 3.7% decline in the TA-Technology index due to negative sentiment on Wall Street regarding artificial intelligence (AI) infrastructure spending and its translation into sufficient returns. Despite this, the TA-Software index gained 3.4% and the TA-Communications and Information Technologies index rose 3.5%. Outside of tech, the TA-Construction index surged 4.6% and the TA-Insurance index increased 2.4%.
Local institutional investors, including pension funds and insurance companies, continued to increase their stock market exposure, with net purchases of approximately NIS 399 million for the week, primarily directed towards the challenged technology sector. Foreign investors, however, adopted a different strategy, recording moderate net sales of NIS 157 million, reducing their exposure to technology and insurance while increasing investments in traditional sectors like real estate, construction, and banking. The general public continued to allocate funds abroad, with weekly purchases of NIS 124 million in foreign funds traded on the exchange.
In macroeconomic news, the Bank of Israel maintained its interest rate at 3.25%, pausing a series of previous cuts. This decision was attributed to concerns over the shekel's depreciation against the dollar since September and rising Brent crude oil prices, both of which could fuel imported inflation. Political uncertainty surrounding upcoming elections also contributed to delaying the forecast for the next rate cut to the third quarter of 2027. This cautious monetary stance contrasts with strong growth forecasts for Israel, with the overall economy projected to grow by 5.6% in 2026 and 7.5% in 2027, significantly outpacing global and major economic bloc projections.
The local bond market saw a positive trend, led by long-term government bonds. The corporate bond market recorded issuances totaling approximately NIS 2.9 billion. Internationally, concerns in the tech sector prompted a shift towards U.S. Treasury bonds, while European bond markets showed divergence, with German yields falling and French yields rising due to fiscal and political concerns.
The upcoming week includes Israel's election day and the stock exchange's announcement of new index compositions. Globally, markets await interest rate decisions from the U.S. Federal Reserve and the European Central Bank, as well as earnings reports from major tech companies like Microsoft, Alphabet, and Amazon.
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