Shekel Loss Is Steinitz Gain as Exports Climb: Israel Overnight

Bank of Israel Governor Stanley Fischer
Stanley Fischer, governor of the Bank of Israel. Photographer: Nelson Ching/Bloomberg

Israel’s weakening shekel, the second-worst performing currency this year in Europe, Middle East and Africa on concern the nation may be poised to attack Iran, will boost growth for the export-focused economy, Finance Minister Yuval Steinitz said.

The currency retreated to the lowest level in three years against the dollar on July 26 on mounting concern that Israel’s military may strike Iran before November elections in the U.S. The shekel rose 0.2 percent against the dollar yesterday to pare its retreat this year to 3.9 percent, the biggest decliner in the region after the Romanian Leu. The Israeli currency was little changed at 3.964 a dollar at 4:31 p.m. in Tel Aviv.

Israel’s economic growth unexpectedly accelerated for the first time in more than a year in the second quarter, driven by an increase in exports and consumer spending. Overseas shipments account for about 40 percent of gross domestic product. Bank of Israel Governor Stanley Fischer ended a program of buying foreign currency after doubling the central bank’s reserves to $75.6 billion since March 2008.

“We are quite happy with the current level of the shekel,” Steinitz, 54, said in an interview in New York yesterday. “I think that is also probably the position of Governor Stanley Fischer because I see he is not interfering anymore.”

The Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York declined for a second day, falling 0.8 percent to 84.48 with Mellanox Technologies Ltd. leading the losses.

Intel, Apple

Israel’s economy will grow at least 4 percent on average in the next 10 years as global companies from Intel Corp. to Apple Inc. invest in the country, Steinitz said.

“This is significant for an already developed economy,” he said. “Job creation is very good since the beginning of this year and investment in the real economy is still growing.”

Apple acquired an Israeli company in January and Intel’s investment unit said will expand its focus in the country in July. Increasing participation of orthodox Jews and Israeli Arabs in the labor market, government investment in education and production of gas from the Mediterranean will also boost economic growth in the coming years, Steinitz said.

The yield on the benchmark Mimshal Shiklit 5.5 percent bonds due January 2022 was unchanged at 4.28 percent today. The yield slipped yesterday after jumping 12 basis points in the previous five days to 4.31 percent.

‘A Lot Higher’

“The potential growth is a lot higher than 4 percent,” Bank Hapoalim Ltd. Chairman Yair Seroussi said. “The question is what will happen in the next year, next two years.”

The shekel will trade at about the same level if the government keeps the budget in check, he said.

The lender, Israel’s second-largest bank by assets, will probably post a return on equity of 10 percent to 12 percent this year, said Seroussi, who is in New York as part of a business delegation to promote investment in Israel.

Hapoalim increased its middle market lending in the last two years to 27 percent from 23 percent to diversify its portfolio, Seroussi said.

Hapoalim’s net income in the second quarter fell to 607 million shekels ($151 million) from 712 million shekels a year ago, according to an Aug. 30 statement. Provisions for bad debt increased to 344 million shekels in the previous quarter from 327 million shekels during the same period in 2011.

Exports of merchandise and services rose 10.3 percent in the second quarter, the Jerusalem-based Central Bureau of Statistics said in am e-mailed statement on Aug. 16. The economy expanded an annualized 3.2 percent compared with a revised 2.8 percent in the first three months of the year, it said.

IDB’s Loss

Yields on IDB Holding Corp.’s 2020 bond increased to a record and the shares fell on Sept. 5 after its credit rating was cut and the holding company owned by Israeli billionaire Nochi Dankner said its second-quarter loss widened.

A Tel Aviv district court has given the company 21 days to reach an agreement with bondholders over payments, the company said last week.

The inability of IDB, which controls Cellcom Israel Ltd. and Shufersal Ltd., to repay creditors won’t have a “dramatic” impact on the Israeli economy and the local labor market, Steinitz said.

“The companies below are good companies and there is no reason why they won’t continue to function,” he said.

Mellanox, Allot

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 the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

Mellanox, the maker of technology used to transfer and store data, slid 8.3 percent in New York yesterday, the most in a year, to $101.65. The shares in Tel Aviv fell 3 percent today to 407.5 shekels, or the equivalent of $102.8.

The shares declined after Stifel Nicolaus & Co. cut its recommendation on the stock last week and Intel reduced its sales forecast.

Allot Communications Ltd. rose for a third day in New York yesterday, climbing 0.7 percent to $27.69. The Tel Aviv shares added 2.9 percent to 111.6 shekels, or $28.15, today.

The Israeli maker of technology that manages traffic on networks may benefit from more demand for its products as Apple Inc. is expected to show a redesigned iPhone on Sept. 12, Matthew Robison, an analyst at Wunderlich Securities Inc. said by phone from San Francisco yesterday.

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