Israel’s TA-25 Index Tumbles Into Bear Market on Global Growth
Israel’s benchmark stock index slid to the lowest level in almost two years on concern the global economic slowdown will hurt corporate profits.
Partner Communications Co., Israel’s second-largest mobile- phone company, skidded to the lowest in more than five years. Discount Investment Corp. (DISI), billionaire Nochi Dankner’s holding company, tumbled 20 percent. The TA-25 Index slumped 2.8 percent to 1,059.68 at the 4:30 p.m. close in Tel Aviv, the lowest since November 2009. The gauge has retreated 21 percent from the record close of 1,341.89 on April 21. A loss of 20 percent or more signals a so-called bear market to some investors.
“There’s still a lot of panic in the market because of uncertainty about the global economy and what that means for company revenues,” said Amir Kahanovich, chief economist at Clal Finance Investment Management Ltd. in Tel Aviv. “Investors are still trying to figure out what’s going on with the Fed announcement and what the Bank of Israel will do locally.”
Federal Reserve Chairman Ben S. Bernanke vowed yesterday to keep borrowing costs at an all-time low to revive a recovery that’s “considerably slower” than expected. The Bank of Israel, which in July held the benchmark interest rate at 3.25 percent for a second month after 10 increases in two years, on Aug. 2 cut its growth forecasts for 2011 and 2012, saying debt reduction plans in developed countries may lead to a global slowdown.
‘No Dividend’
The 25 companies on Israel’s benchmark are valued at an average 9.7 times estimated earnings, according to Bloomberg data. That compares with 10.9 times for the MSCI World Index.
Partner slid 8.6 percent to 38.39 shekels, the lowest since July 2006. The company reported second-quarter net income fell 30 percent to 205 million shekels ($58 million) and said it expects net income in the second half to be “significantly lower” than the second half of 2010. It said it won’t pay a dividend for the second quarter.
“The company’s board of directors resolved not to distribute a dividend at this time, in light of the significant increase in the level of uncertainty in the global economy and the Israeli economy and the changes in the Israeli telecom market and their impact on Partner,” Chief Executive Officer Yacov Gelbard said.
Lower Valuation
Discount Investment tumbled 20 percent to 26.05 shekels, the biggest decline since October 2008. Koor Industries Ltd. (KOR), which is 63 percent-owned by Discount, said it will record a second-quarter loss of about 1.8 billion shekels related to the decline in the value of its investment in Credit Suisse Group AG. (CSGN) Discount’s share of the loss will be 1.1 billion shekels, Koor said.
Koor shares slumped 16 percent to 36.50 shekels, the lowest since January 2009.
To contact the reporter on this story: Susan Lerner in Jerusalem at slerner2@bloomberg.net
To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net
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