Israeli stocks traded in the U.S. fell the most in two weeks as exit polls showed support for Prime Minister Benjamin Netanyahu’s party in nationwide elections weakened.
The Bloomberg Israel-US Equity Index (ISRA25BN) of the largest U.S.- traded Israeli companies dropped 0.6 percent to 85.98 yesterday in New York. Technology developer Mellanox Technologies Ltd. (MLNX) slid the most since Jan. 8, while Partner Communications Co. (PTNR) retreated 3.8 percent as Scailex Corp. said regulators approved the sale of a portion of its Partner stake. The benchmark TA-25 equities index climbed for the second time this week, gaining 1.1 percent at 9:52 a.m. in Tel Aviv after being closed yesterday for election day.
Netanyahu’s Likud-Beitenu ticket fell short of projections as some voters moved to the upstart Yesh Atid party, according to Channel 2 and Channel 10 exit polls. Likud-Beitenu probably won 31 seats in Israel’s 120-member Knesset, down from 42 seats the alliance of two parties currently holds. Pre-election polls had projected his ticket would get between 32 and 37 seats. Netanyahu called an early vote in October after failing to reach agreement with coalition partners over the 2013 budget.
“The surprising strength of Yesh Atid was the reason for the pull back today as it was viewed by some investors as disappointing,” Steven Schoenfeld, the founder of Bluestar Global Investors LLC, a financial research company focused on Israel and the Middle East, said yesterday in a telephone interview from New York. “Nonetheless, there’s enough consensus on economic reforms with Yesh Atid.” This party “will be good for the economy,” he said.
The Bloomberg US-Israel Index dropped as much as 1 percent to 85.69 yesterday in New York. The measure pared some of its declines after the exit polls showed Netanyahu was re-elected for a third term.
A former finance minister, Netanyahu stoked competition in Israel’s telecommunications sector by opening the market to new providers, initiated steps to break the nation’s biggest monopolies and reduced the unemployment rate. He also ensured Bank of Israel Governor Stanley Fischer stayed in office for a second term by pushing a new central bank law through parliament, a condition Fischer gave for signing a second term.
“What is important is for investors to get clarity about what this government plans to do in regulation and reforms,” Jacob de Tusch-Lec, who helps oversee $20 billion at Artemis Investment Management LLP, including Israeli stocks, said in a telephone interview yesterday from London. “What really matters is what key people will be put in charge of regulating various sectors, what policy initiatives the government signals it will undertake most quickly.”
Israel’s local bonds have rallied 36 percent in dollar terms since Netanyahu took office on March 31, 2009, compared with a 22 percent increase for a global index of government debt, data compiled by Bank of America Merrill Lynch show. The shekel rallied 13 percent, its best advance under any government since at least 1984 as the premier fostered economic growth faster than in the U.S. and Europe. The benchmark stock index climbed 65 percent and hit a record 1,341.89 during Netanyahu’s term, in April 2011. The shekel was little changed at 3.7315 per dollar at 9:57 a.m. in Tel Aviv.
Since 2009, the Israeli economy has expanded by 14.7 percent, compared with 3.2 percent in the U.S. and a contraction of 1.5 percent in the euro region, the Finance Ministry in Jerusalem said in a Jan. 1 report. The jobless rate in 2012 was 6.8 percent compared with 10.9 percent in the euro region, based on an average of quarterly data, the ministry said.
Yesh Atid, Hebrew for “There is a Future,” came in second with about 19 seats, according to exit polls. Led by ex-TV host Yair Lapid, the party called for reforms to lower housing costs and draft ultra-Orthodox Jews into the army.
Mellanox, the Yokneam Elit-based maker of technology used to transfer and store data, slumped 4.2 percent to $48.08, sliding for a third day in the U.S. The company’s shares traded in Tel Aviv lost 2.3 percent to 181 shekels, or the equivalent of $48.57 this morning.
The company is scheduled to report today that fourth- quarter sales rose 65 percent to $120 million, according to the mean estimate of 13 analysts surveyed by Bloomberg. Shares tumbled 17 percent on Jan. 3 after Mellanox cut its fourth- quarter revenue forecast, citing weaker-than-expected demand.
Mellanox was rated overweight, or the equivalent of buy at Piper Jaffray Cos. in an initial coverage of the shares with a 12-month price target of $65.
Partner, Israel’s second-largest mobile phone operator, dropped 3.8 percent to $5.76, the lowest close in New York since Dec. 18. Partner’s Tel Aviv shares advanced 1.6 percent to 21.99 shekels, or $5.90.
Moshe Kahlon, Israel’s communications minister, approved the sale of a portion of Partner shares that are owned by Scailex to a unit of Saban Capital Group Inc., Scailex said in a statement to the stock exchange Jan. 21.
SodaStream International Ltd. (SODA), the maker of soda machines, gained 2.1 percent to $49.75 on trading volume that was four times the stock’s three-month daily average, according to data compiled by Bloomberg.
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