Bloomberg News

Stocks at 5-Month High as Iran Strike Recedes: Israel Overnight

March 27, 2012

Israeli stocks trading in New York climbed to the highest level since October amid speculation sanctions on Iran are reducing prospects Israel will take military action against the Persian Gulf nation’s nuclear sites.

The Bloomberg Israel-US Equity Index (ISRA25BN) of the largest Israeli companies traded in New York rose 2.2 percent to 90.04 yesterday, the highest level since Oct. 28, led by Teva Pharmaceutical Industries Ltd. (TEVA:US) and Check Point Software Technologies Ltd. (CHKP:US) The TA-25 Index in Israel rose less than 0.1 percent to 1,149.43, a five-month high, at the 4:30 p.m. in Tel Aviv,

Odds compiled by Intrade.com that Israel or the United States will strike Iran by the end of 2012 fell to the lowest level in almost two weeks yesterday, as blocks on financial transactions with Iran come into force and countries like Saudi Arabia say they can help make up for a shortfall in Iranian oil supplies. Israeli stocks have gained 5.8 percent this year, compared with a 20 percent jump in the Nasdaq Composite Index, on concern a strike would destabilize the region.

“People are having higher expectations that the economic sanctions will work better than the military attack,” Zach Herzog, a trader at Psagot Investment House Ltd. said by phone from Tel Aviv yesterday. “The Iranian situation is a little less hawkish and that has allowed the Israel stock market to pick up.”

Teva, the world’s largest maker of generic drugs, climbed 1.9 percent to $43.90 in New York. The Tel Aviv-listed shares gained less than 0.1 percent today to 162.7 shekels, or the equivalent of $43.76. Check Point, the second-largest maker of equipment designed to keep Internet networks secure, advanced 2.1 percent to $63.95.

Targeting Trade

Sanctions aimed at curbing Iran’s nuclear program have targeted trade, banking and oil exports. The Society for Worldwide Interbank Financial Telecommunication, known as Swift -- the dominant messaging service for international financial transactions -- said on March 15 that it will halt services for about 24 Iranian lenders.

Saudi Arabia can boost oil output by 25 percent beyond the almost 10 million barrels a day it already produces, even as crude markets are oversupplied, Ali al-Naimi, the country’s oil minister, said last week.

“There is still a window that allows for a diplomatic resolution,” U.S. President Barack Obama said before meeting with Israeli Prime Minister Benjamin Netanyahu on March 5.

Wagers of a strike on Iran by the end of the year fell to 37 percent yesterday, the lowest level since March 14. The odds were as high as 62 percent last month.

‘Alleviated Concern’

“What we’re seeing is a little alleviated concern on the fact that some of these sanctions have been implemented,” Daniel Rapoport, the head of equity and derivatives trading at Tel Aviv-based Bank Leumi Le-Israel Ltd., Israel’s biggest bank by assets, said by phone. “We’re catching up to what global markets were doing because people were so concerned and underexposed to Israeli equities. There’s some catching up in the last couple days.”

The TA-25 Index (TA-25) has added 2 percent since Nov. 8 when the United Nations reported that Iran was continuing to work on a program that would potentially give the country the capacity to develop nuclear weapons. The Nasdaq Composite climbed 14 percent during the same period.

Iran has been under UN investigation since 2003 over suspected nuclear weapons development. The Persian Gulf state says its nuclear program is for energy, while President Mahmoud Ahmadinejad has said Israel should be wiped off the map.

The underperformance of Israeli stocks has seen valuations trade at 11.2 times estimated earnings, while companies in the Nasdaq Stock Market fetch an average 16.7 times earnings.

‘Seem Cheap’

“As a strike on Iran becomes less imminent, people are taking a look at the valuations on Israeli stocks relative to their peers and they seem cheap,” Jamia Jasper, president of AmerIsrael Capital Management LLC in New York, said in an e- mail.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, was upgraded to developed-market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation and Development. Israel has about 60 companies traded on the Nasdaq, the most of any nation outside the U.S. after China.

The Bank of Israel kept its benchmark interest rate unchanged for a second month as it increased the economic growth forecast for 2012.

The monetary policy committee, led by Governor Stanley Fischer, held the rate at 2.5 percent, the Jerusalem-based central bank said on its website yesterday. The bank raised its growth forecast to 3.1 percent from December’s 2.8 percent, citing an economic recovery in the U.S.

AudioCodes Drops

Federal Reserve Chairman Ben S. Bernanke said yesterday that while he’s encouraged by the unemployment rate’s decline to 8.3 percent, a continuation of accommodative monetary policy will be needed to make further progress.

AudioCodes Ltd. (AUDC), the Lod, Israel-based maker of technology to enable Internet phone calls, sank 15 percent to $3. The Tel Aviv shares rose 0.5 percent to 10.92 shekels, or the equivalent of $2.94. They tumbled 17 percent yesterday.

Revenue for 2012 will be between $140 million and $150 million for the full year, below a previous estimate of $155 million to $162 million, AudioCodes said yesterday in a Globe Newswire statement. The revised estimate reflects weakness in sales in North America and lower than anticipated government sales, the company said.

LivePerson Inc. (LPSN:US), a customer service software maker, increased 3 percent to $17.32, the highest level on record. The company’s shares in Tel Aviv dropped 0.3 percent today to 64.41 shekels, or the equivalent of $17.32.

Shares of the New York-based company were rated outperform in an initial coverage at Harel Finance Trade & Securities Ltd., meaning they are expected to gain more than the overall market, according to an e-mailed note yesterday.

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: Emma O’Brien at eobrien6@bloomberg.net


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • TEVA
    (Teva Pharmaceutical Industries Ltd)
    • $50.85 USD
    • 0.94
    • 1.85%
  • CHKP
    (Check Point Software Technologies Ltd)
    • $66.96 USD
    • 0.59
    • 0.88%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus