Israeli Stock Index Tumbles Most Since 2000

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Israel’s benchmark stock index plunged the most in almost 11 years after Standard & Poor’s lowered the U.S. credit rating and amid concern the widening sovereign debt crisis in Europe will stall global growth.

Israel Discount Bank Ltd. (DSCT), the country’s third-largest lender, skidded 10 percent. Nice Systems Ltd. (NICE) slumped the most since November 2008. All 25 shares in the TA-25 Index tumbled, pushing the gauge down 7 percent, the biggest decline since October 2000, to 1,074.27 at the 4:30 p.m. close in Tel Aviv. The index is near the so-called bear-market territory after retreating 19.9 percent from a record high of 1,341.89 on April 21.

“It could be a turbulent market in the next few weeks,” said Ron Eichel, chief economist and strategist at Meitav Investment House Ltd. in Tel Aviv. “If there’s a storm globally, it’s going to affect Israel, which has very large exports to the U.S. and the eurozone.”

S&P cut the AAA credit rating of the U.S. to AA+ on Aug. 5, while keeping the outlook at “negative.” S&P on Aug. 2 placed Israel’s AAA rating on U.S.-guaranteed sovereign bonds on “CreditWatch.” The European Central Bank left interest rates unchanged on Aug. 4 as economic growth slows and the region’s debt crisis spreads to Italy and Spain.

Slower Growth

The Bank of Israel on Aug. 2 cut its economic growth forecasts for this year and next, saying debt reduction plans in developed countries may lead to a global slowdown. The economy will expand 4.8 percent in 2011 and 3.9 percent in 2012, the bank said, lowering its forecasts from 5.2 percent and 4.2 percent, respectively.

Finance Minister Yuval Steinitz yesterday called the downgrade a “warning sign” for Israel’s economy. Supervisor of Banks David Zaken said today the downgrade “underlines the need to be prepared for scenarios that if we talked about them a few years ago, would have seemed impossible.”

Discount slumped the most since October 2008 to 5.44 shekels. Nice, a maker of digital surveillance and monitoring systems, plummeted 9.8 percent to 101.80 shekels.

Government bonds fell for the first time in a week. The yield on the benchmark 5 percent Mimshal Shiklit due January 2020 increased the most since June, rising five basis points, or 0.05 percentage point, to 4.95 percent. The Tel-Bond 40 Index of corporate bonds retreated 3.3 percent, the most since November 2008.

http://www.bloomberg.com/news/2011-08-07/israeli-stocks-tumble-most-since-november-2008-on-u-s-rating-cut-europe.html

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"Mideast markets were the first to react to credit rating agency Standard & Poor's decision late Friday to cut the U.S. level one notch from its top AAA rating.

Most Mideast markets operate Sunday to Thursday. Saudi Arabia's stock market was the region's only to open Saturday, when it plunged 5.5%."

Edited August 7, 2011 by Lord Infamous

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JERUSALEM, Aug. 7 (Xinhua) — The Tel Aviv Stock Exchange (TASE) registered a sharp 6.5 percent fall on Sunday morning in the wake of Standard & Poor's (S&P) downgrading of United States credit on Friday from AAA to AA+.

The step was the first such downgrade in American history.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.

Trading in the TASE was stopped during the morning due to the instability in indices.

"When the trading gets high or low we use what we call an ' English Opening,'" TASE spokeswoman Idit Yaaron told Xinhua, "and this happens if the trading gets higher or lower than 2.5 percent, the trading stops for two or three minutes and it's checked again. If the trading is still higher or lower than 2.5, then it stops again."

If, after this measure, trading goes up or down by five percent, Yaaron said, "the TASE stops the trading for 45 minutes for the investors to sit down and check their orders for errors," and consider further action.

The "last time we had an English Opening was 2008, when the Lehman Brothers collapsed," Yaaron said.

S&P, whose move prompted major losses on international markets, based their decision on concerns over the rising debt and budget deficits in the U.S.

Israel's Finance Ministry and the Bank of Israel issued a joint statement on Saturday saying that they were closely monitoring the situation, along with the Securities Authority.

While, "the implications of events in the global markets are not clear at this stage," the agencies said they stood "ready to use the tools available to them as necessary," the statement read.

Senior bank and ministry officials held an emergency meeting on Saturday night to assess the situation, although the document reassured the public that Israel's macroeconomic situation "is good," and that, "so far the debt crises abroad have had a limited impact on Israel, due to its macroeconomic strength."

The U.S. accounts for close to a quarter of Israel's exports, and more than 10 percent of it's imports, according to official statistics.

Edited August 7, 2011 by Lord Infamous