Israeli Stocks, Shekel Drop Amid Rising Security Concerns

  • Three Israelis killed in multiple attacks on Tuesday
  • Tourism and export industries could be worst affected

Israeli stocks dropped and the shekel weakened on investor concerns that the country’s worst violence since the 2014 Gaza Strip war will impact economic growth that is already at a six-year low.

The TA-25 Index fell the most in two weeks, extending losses a fourth day and making it the seventh worst-performing gauge among global indexes tracked by Bloomberg. The shekel depreciated 0.9 percent, the most since Sept. 18, to 3.8685 per dollar at 5:34 p.m. in Tel Aviv.

Arab assailants stabbed, shot or drove into Jewish Israelis in three separate incidents in Jerusalem and two attacks in Ra’anana in the space of 90 minutes on Tuesday morning, Israeli police said. Police reported multiple casualties including three dead. A police spokeswoman also said a Jewish Israeli who tried to stab an Arab resident of Kiryat Ata, near Haifa, was arrested. The Israeli cabinet held an emergency session to discuss the wave of attacks.

“If the current escalation in violence will be more than temporary, then we are likely to see an impact on Israeli tourism and exports,” Rony Gitlin, head of spot trading at Bank Leumi Le-Israel Ltd., said by phone from Tel Aviv. “The security situation is making the local market uncomfortable but we are not yet seeing any major pressure for big sell-offs.”

Bank Retreat

The benchmark gauge fell 1.1 percent, the most since Sept. 29, to 1,497.20 at the close in Tel Aviv, bringing its four-day decline to 2.5 percent. The index has slipped 13 percent from its all-time high of 1,723.56 on Aug. 5. Bond yields were unchanged at 2.18 percent after rising for two days.

The nation’s two largest banks, Bank Hapoalim Ltd. and Bank Leumi Le-Israel Ltd., who also have the two biggest weightings on the TA-25, were among the shares that led the gauge lower, declining 1.9 percent and 3 percent respectively. Bezeq Israeli Telecommunication Corp., fixed line services and mobile phone provider, was also among the worst performers, declining 2.8 percent to the lowest since Sept. 1.

“Banks are the barometer of the local economy, and if there is a slowdown they are likely to be among the first affected,” Dorin Palas, head of research at Israel Brokerage & Investments Ltd. in Tel Aviv, said by phone.

Slowdown

Israel’s economy retreated during a previous five-year Palestinian uprising, or intifada, that began in September 2000. The nation’s growth domestic product increased just 0.1 percent in 2001 and contracted the same amount the following year, the worst economic performance since Israel’s birth, according to the Central Bureau of Statistics.

‘If security events will become prolonged, then for sure that will impact the economy as people will go out less and spend less,” Ronen Matmon, chief investment officer at Petach Tikva, Israel-based Excellence Nessuah Provident Funds Ltd., said by phone. “I have not changed my investment strategy at the moment. We continually assess the situation,” he said. Excellence oversees 22 billion shekels ($5.7 billion), of which about 65 percent is invested in Israeli shares and bonds, he said.

The economy is expected to expand by 2.6 percent this year, and 2.9 percent next year, the Finance Ministry said last month, down from previous projections of 3.1 percent and 3.3 percent.

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To contact the reporter on this story:
Shoshanna Solomon in Tel Aviv at +972-3-542-7108 or
ssolomon22@bloomberg.net
To contact the editors responsible for this story:
Samuel Potter at +971-4-3641050 or
spotter33@bloomberg.net
Matthew Kalman

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