Tel Aviv Stock Exchange Plummets Amid Political Uncertainty

The Tel Aviv Stock Exchange experienced sharp declines following the recent elections, with major indices showing significant losses. The TA-35 index dropped 3.5%, the TA-125 fell 3.13%, and the TA-90 weakened by 2%. Since the elections, which heightened political uncertainty and concerns about forming a stable government, the main indices have lost approximately 8% of their value, with the banking index also seeing similar losses. The construction and insurance sectors experienced particularly steep drops of around 16%.

Despite the market downturn and a 0.5% rise in the dollar since the elections, foreign investors have surprisingly increased their net purchases of Tel Aviv stocks by nearly 900 million shekels. A report from Nissan Avraham, an economist at the Stock Exchange's research unit, indicated that foreign investors bought 894 million shekels in net stock purchases between October 28 and November 4, primarily in the financial sector. This included 276 million shekels in insurance stocks, 248 million in banks, and 106 million in financial services companies.

In contrast, Israeli institutional investors, who manage public pension and savings funds, took a different approach. While foreign investors favored banks and insurance companies, Israeli institutions sold bank stocks worth about 137 million shekels and insurance stocks worth 111 million shekels. They instead invested approximately 380 million shekels in technology stocks and 106 million in real estate and construction, sectors less dependent on the Israeli economy.

Mutual funds sold stocks totaling 470 million shekels, with significant sales in insurance and trade/services, as well as technology and biomed. Exchange-traded funds, however, saw net purchases of 43 million shekels. The ongoing political uncertainty and concerns about forming a stable government continue to weigh on the market, with Israel's risk premium remaining elevated.