Israeli companies listed in the U.S. rose the most in two months as waning concern the global economy is falling into recession attracted investors to the cheapest valuations on record.
The Bloomberg Israel-US 25 Index of the largest Israeli companies traded in the U.S. climbed 3.3 percent to 83.02 in New York yesterday, the steepest gain since Aug. 11, led by Internet Gold-Golden Lines Ltd. (IGLD) and Partner Communications Co. Gains were bolstered as Barclays Capital raised its recommendation on Israeli technology companies to “positive.” Israel’s TA-25 Index benchmark rose 0.6 percent at the 4:30 p.m. close in Tel Aviv after surging the most since 2009 yesterday.
Global stocks rallied yesterday, with the S&P 500 having the biggest gain since August, as the leaders of Germany and France gave themselves three weeks to create a plan to recapitalize banks. The average multiple on Israeli stocks traded in the U.S. had fallen to 7.98 times expected earnings, the lowest since at least 2006, as Prime Minister Benjamin Netanyahu’s government sought to boost local competition while Europe’s crisis eroded global growth.
“This was just bottom picking,” Saar Golan, a trader at Clal Finance Brokerage Ltd. in Tel Aviv, said by telephone. Some of the biggest gainers today “are among the worst performers this year.”
Internet Gold shares fell 0.9 percent to 41.74 shekels in Tel Aviv, or the equivalent of $11.33, after surging 9.7 percent yesterday. They jumped 10 percent to $11.47 in the U.S. yesterday. The Israeli Internet provider has posted the biggest decline this year on the Bloomberg Israel-US 25 Index, losing 66 percent.
Finance Minister Yuval Steinitz said Oct. 9 that Israel is seeking a company to partner with Israel Electric Corp. to build a fiber-optic network that can provide fast Internet and television service and compete with existing fixed-line companies.
Partner, Israel’s second-largest mobile-phone operator, rose 1.5 percent to 40.55 shekels, or the equivalent of $11, in Tel Aviv. The shares gained 7.4 percent to $10.90 in New York yesterday, paring its decline to 46 percent this year.
Cellcom Israel Ltd. (CEL), the country’s largest mobile phone company, decreased 0.6 percent to 76.37 shekels, or $20.75. The U.S. stock advanced 5.1 percent to $20.65 yesterday. The shares have lost 37 percent in New York this year.
Israeli telecommunication companies must lease their networks to newcomers, who will compete with them in the local market, according to recommendations by a committee submitted to the Minister of Communications on Oct. 4.
“There was a lot of negative news flow on the cellular companies because of all the reforms they’ve been doing,” said Terence Klingman, the head of research at Meitav Brokerage in Tel Aviv. “Now, they’re having a bounce back.”
Ceva Inc. (CEVA), EZchip Semiconductor Ltd. (EZCH) and Mellanox Technologies Ltd. (MLNX) are Barclays’s favorite semiconductor companies among Israeli technology companies, which were raised from “neutral,” Joseph Wolf, a Tel Aviv-based analyst, wrote in an e-mailed report yesterday.
“The stocks we are recommending play into the fastest- growing long-term stories in tech, such as cloud computing, storage and mobile data and handsets,” he wrote. “On an Israel specific level we see technology stocks as much less exposed to geopolitical risk and to potential policy shifts.”
Israel, whose population of 7.7 million is similar to Switzerland’s, has about 60 companies traded on the Nasdaq stock market, the most of any country outside North America after China. It is also home to the largest number of startup companies per capita in the world.
Israeli technology companies raised $569 million in capital during the second quarter of 2011, the most in two years and up from $343 million in the same period last year, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.
Ceva, the developer of chips available in most iPhones and iPads, climbed 5.4 percent to $26.60.
Mellanox, the adapter maker that’s part owned by Oracle Corp., gained 1.2 percent to 130 shekels, or $35.31 in Tel Aviv today. The shares increased 3.3 percent to $34.75 in New York yesterday.
EZchip, the network processors maker that counts Cisco Systems Inc. as a customer, rose 1 percent to 125.2 shekels, or $34.01. It climbed to $33.84 in the U.S. yesterday.
Check Point Software Technologies Ltd. (CHKP), the world’s second- largest network-security company, rose 3.2 percent to $57.81, the highest level in 10 weeks.
“We remain positive on Check Point’s growth opportunities,” Shaul Eyal, an analyst at Oppenheimer & Co. in New York, wrote in an e-mailed report dated Oct. 9, ahead of the company’s third-quarter earnings announcement on Oct. 18. “Demand for Check Point’s products/solutions remains unchanged despite the broader macro-economic headwinds.”
The shekel gained 0.3 percent to 3.6816 per dollar at 5:23 p.m. in Tel Aviv. The currency is headed for a 4.2 percent drop this year, the worst performance since 2005 when the shekel fell 6.1 percent.
Central Bank Dissent
Bank of Israel Governor Stanley Fischer’s decision to cut the benchmark interest rate to 3 percent wasn’t backed unanimously by central bank officials who gave their recommendations at the rate-setting meeting, according to minutes released by e-mail yesterday. Two officials supported the decision, while three favored leaving the rate unchanged.
The Cabinet named on Oct. 9 a six-member committee that will make future monetary policy decisions. The central bank governor has had the sole authority to make such decisions.
Elbit Systems Ltd. (ESLT), Israel’s largest non-government defense contractor, lost 1.6 percent to 158 shekels, or the equivalent of $42.91. The U.S. shares gained 6 percent to $43.75 in New York. Elbit’s unit received a $23 million, five-year maintenance contract from the U.S. Army.
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