Tel Aviv Stock Exchange Plunges 8% Since Election Amid Political Uncertainty

Israel's main stock market indices have dropped approximately 8% since the recent elections, which have heightened political uncertainty and concerns about forming a stable government. The banking index also saw a similar decline, while the construction and insurance sectors experienced steeper falls of around 16%. Despite these market downturns and a weakening shekel, foreign investors have surprisingly increased their net purchases of Israeli stocks by nearly 900 million shekels since the election period, which ran from October 28 to November 4. These foreign investments were primarily directed towards the financial sector, including insurance and banking stocks, which are highly sensitive to the local economy. This trend contrasts with the behavior of Israeli institutional investors, who manage public pension and savings funds. While they made net purchases of about 100 million shekels in the stock market, they sold off bank and insurance stocks worth approximately 248 million shekels and 111 million shekels respectively. Instead, Israeli institutions favored technology and real estate stocks, investing around 380 million shekels in tech companies, which often operate internationally and are less dependent on the Israeli economy. Mutual funds, however, sold stocks totaling about 470 million shekels, with significant sales in the insurance and services sectors. The ongoing political uncertainty and the risk premium associated with Israel continue to weigh on the market.