Tel Aviv Stock Exchange (TASE) CEO Itai Ben-Zeev commented on Israel's economic state on Tuesday, saying that "The market's underperformance since the beginning of the year…indicates that Israel is moving further away from the world's financial markets."
Ben-Zeev's remarks come as TASE published its financial reports published on Tuesday as well. He said that the Israeli market's underperformance, which might "reflect the investors' expectations more than anything," "and the negative sentiment towards the local economy, indicates that Israel is moving further away from the world's financial markets which are in a recovery."
The TASE chief added that "The Israeli government must take responsibility and be attentive to the increasing warnings of the international bodies which indicate the significant risks that could damage Israel's economic strength."
This, Ben-Zeev said, "will eventually harm the [financial] assets and the quality of life of all Israelis. The government must act to restore trust, stability and certainty to the local capital market."
As the far-right Netanyahu government advances its judicial overhaul, the Tel Aviv-125 index has gained only 3.8 percent since the beginning of the year, while prominent U.S. and European indexes gained much higher rates. For example, the U.S. benchmark S&P-500 pack has gained 17 percent since the beginning of the year and the Euro STOXX 50 index rose 13 percent.
Ben-Zeev's address, which echoed a similar message expressed by the stock exchange's announcement, conveyed a growing fear for the local market's future. Along with an analysis of the current financial data, TASE emphasized that "The Israeli economy has high growth potential thanks to the country's demographics and strong economic fundamentals – a combination that is a significant growth engine for the economy and the Israeli stock market."
TASE also noted that although "The leading stock indexes underperformed, initial public offerings were stopped and financing by listed companies slowed down compared to the first half of last year, the stock exchange recorded a significant increase in the trading cycles of government and zero-coupon bonds."
TASE further emphasized that according to data provided by the Bank of Israel, what led to high trading cycles in government bonds were their purchase by foreign investors in an amount of approximately 20 billion shekels (approximately $5,381,176,000) between January and May 2023. For comparison, government bonds purchased in all of 2022 reached a total amount of only 1 billion shekels.
The stock exchange's financial data indicate that in the first half of 2023 its revenue almost did not change compared to the first half of 2022, totaling in 193 million shekels ($51.96 million) – a 2 percent increase. Similarly, the gains during the year's second quarter increased by 2 percent compared to the corresponding period last year, amounting to 93 million shekels ($25 million).
The stock exchange gained 19 million shekels ($5.1 million) in the second quarter of 2023 – an increase of 32 percent compared to the corresponding quarter. This is explained as gains due to financing and a positive return on the market's investments in Israeli government bonds and the increase in interest rates that led to a similar increase in deposits rates.
The stock exchange average trading turnover in was 2.07 billion shekels ($557.3 million) in the second quarter, – a lower amount than the average turnover in the first quarter which was 2.14 billion shekels ($576.1 million). In 2022, the first and second quarters were characterized by higher trading turnovers of 2.6 and 2.4 billion shekels respectively.
Yaniv Pagut, vice president of the Trading, Derivatives and Indices Department at TASE, had recently written Haaretz's financial daily TheMarker that investing the local pensions entirely in the S&P-500 index was a dangerous decision.
"Ads by local finance companies directing Israelis to invest their entire long-term savings in the S&P-500 index are always unusual, and even more so in the context of the judicial coup," he wrote.
Pagut's claims raised criticism, especially after he added that "It's appropriate to consider canceling the tax benefit for those who invest all their money in the S&P-500 index."
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