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Arab Spring, Social Unrest Sink Index in 2011: Israel Overnight

Israeli stocks traded in New York (ISRA25BN) fell last year, with the Bloomberg Israel-US 25 Index (ISRA25BN) lagging the Nasdaq Composite Index by the most since 2006, on concern uprisings in Arab nations and local protests over rising consumer prices will reduce companies’ revenue.

The measure of the largest Israeli companies traded in New York fell 19 percent last year, the biggest annual drop since Bloomberg began tracking the index in 2006. Partner Communications Co. (PTNR) and Alon Holdings Blue Square-Israel Ltd. (BSI) led declines among most-traded shares. The Nasdaq Composite Index lost 1.8 percent. The Tel Aviv benchmark TA-25 Index (TA-25) tumbled 18 percent in 2011, the worst performance since 2008. The gauge gained 1.3 percent at the 4:30 p.m. close in Tel Aviv.

Mounting concern that Arab Spring revolts in Egypt, Libya, Tunisia and Yemen will raise security threats in the region along with heightened regulation following social unrest in the Jewish state have pushed stocks lower, according to Ori Licht, head of research at I.B.I.-Israel Brokerage & Investments Ltd.

“In addition to all the troubles you see around the world, Israel is facing these specific hurdles with the Arab Spring and the social protests,” Licht said by phone from Tel Aviv. “That’s what led to the underperformance.”

The Standard & Poor’s 500 Index (SPX) was little changed in 2011, while the Stoxx Europe 600 Index dropped 11 percent as U.S. leaders wrangled over deficit cuts and European policymakers remained divided on their response to the debt crisis.

TA-25 Declines

The shekel weakened 7.5 percent last year, the most since 2001, to 3.8106 a dollar.

Partner, Israel’s second-largest mobile phone provider, dropped (PTNR) 57 percent last year to $8.84, the biggest decline since 2000. The Tel Aviv shares sank 53 percent, the most since they started trading in 2002.

Shares fell as the government steps up efforts to boost competition in the local cellular market and on mounting concern about shareholder Ilan Ben Dov’s investment company Tao Tsuot Ltd.’s debt problems. Partner said in August that it won’t pay a second-quarter dividend because of the changes in the telecommunication market.

“Foreign investors are pulling out because they saw the impact of the protests and companies starting to report lower profits,” said Uriel Goren, the head of international clients desk at DS Securities & Investments. Partner advanced 3 percent today to 34.68 shekels, or the equivalent of $9.10.

Cost-of-Living Protests

Blue Square, Israel’s second-largest food retailer, dropped 55 percent last year to $3.97, the most since 2008, as demonstrations and boycotts by Israelis against increases in the cost of living have led companies to cut prices.

Gross domestic product (ISGDPNYY) expanded an annualized 3.4 percent in the third quarter, slowing from 5 percent in the year-earlier period, according to the Jerusalem-based Central Bureau of Statistics. The growth has been easing as the debt crisis in Europe crimps demand for exports such as electronic components. Overseas shipments account for almost 40 percent of Israel’s gross domestic product.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq stock market, the most of any country outside North America after China. It’s also home to the largest number of startup companies per capita in the world.

Technology companies led gains on the Bloomberg Israel-US 25 Index (ISRA25BN) in 2011, with Allot Communications Ltd. (ALLT) advancing 31 percent to $15.20 and Mellanox Technologies Ltd. (MLNX) jumping 24 percent to $32.49.

Allot Sales Forecast

Allot, the maker of equipment for monitoring Internet traffic, will probably report (ALLT) 2011 sales of $76 million, a 34 percent rise from 2010, according to the median estimate of nine analysts surveyed by Bloomberg.

Allot pared some gains last year after Bloomberg News reported that the company’s gear was sold to Iran and a lawmaker called for an investigation. Chief Executive Officer Rami Hadar said in a Dec. 23 e-mail that the company didn’t know its products were sold to Iran.

Mellanox, the adapter maker part-owned by Oracle Corp. (ORCL), “will see additional benefit as the data boom necessitates high-performance technologies in non-traditional markets,” Brian Freed, an analyst at Wunderlich Securities Inc., wrote in an e-mailed report last week.

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s largest maker of generic drugs, dropped 23 percent to $40.36, the most since 2006, as new rivals emerged for the drugmaker’s multiple sclerosis treatment Copaxone, and the company introduced fewer drugs last year.

Teva’s Israeli shares, down 18 percent last year, gained 1.4 percent to 155.5 shekels today, or the equivalent of $40.81.

Perrigo Co. (PRGO), the largest U.S. maker of generic over-the- counter drugs, climbed 54 percent to $97.30 in New York. The Tel Aviv shares, up 64 percent last year, were the biggest gainers on the TA-25 Index (TA-25), after the company was added to the S&P 500 and Nasdaq 100 indexes last year.

The shares closed unchanged today at 374 shekels, or the equivalent of $98.15.

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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