Bloomberg News

Troop Call-Up Sends Blue Square Lower: Israel Overnight

November 15, 2012

Israeli stocks traded in New York sank to a four-month low, led by Alon Holdings Blue Square- Israel Ltd. (BSI:US), as the government said it’s ready to boost military operations after Tel Aviv was targeted by Gaza militants.

The Bloomberg Israel-US Equity Index (ISRA25BN) of the most traded Israeli companies in New York retreated 0.3 percent to 81.96, the lowest since July 25. Blue Square, the nation’s second- largest supermarket chain, fell the most in 14 months, while SodaStream International Ltd. (SODA:US) declined to the lowest since June. The cost of protecting Israeli bonds against default surged to the highest level in two months and the shekel weakened for a second day.

Israeli Defense Minister Ehud Barak signaled that Israel is ready to escalate its military operations against Gaza after at least one long-range missile was fired at Tel Aviv by Palestinian militants. The attacks marked the first time since the 1991 Gulf War that sirens have been activated in the most populated part of the country, according to non-profit organization The Israel Project. The military is calling up 30,000 reservists, army spokesman Yoav Mordechai said.

“Local retail companies might see more of an impact, and this is where investors will be more cautious,” Daniel Rapoport, the head of equity and derivatives at Bank Leumi Le- Israel Ltd. in Tel Aviv, said by phone. “Troops going into Gaza would prolong the events and would disturb the financial and economic life of the country.”

Israel’s benchmark TA-25 Index fell 0.6 percent to 1,181.76 in Tel Aviv prior to the rocket fire yesterday, capping a 2.5 percent slump this week, the biggest since June. The yield on Mimshal Shiklit benchmark 10-year bonds rose nine basis points, or 0.09 percentage point, to 4.01 percent in the last five days.

Pillar of Defense

Israel began a military operation termed Pillar of Defense on Nov. 14 against militants in the Gaza Strip. At least 13 Palestinians have been killed in Israeli military strikes, including the leader of the Hamas military wing, and three Israelis died in one of 200 rocket attacks launched from Gaza in the past 24 hours.

The rocket fired at the Tel Aviv area of Gush Dan, home to about 1.3 million people, probably fell in the sea, police spokesman Mickey Rosenfeld said, noting there was no damage and no injuries reported.

The missile attack “and the volume of fire in general toward Israel is an escalation and there will be a price to pay,” Barak said on Channel 2 television yesterday.

In December 2008, Israeli tanks and soldiers entered Gaza and more than 1,100 Palestinians and 12 Israelis were killed in the subsequent fighting. The benchmark TA-25 Index (TA-25) gained 6.9 percent in the 22-day operation.

‘Emotional Reaction’

“The initial sell-off was an emotional reaction to rockets being fired,” Steven Schoenfeld, founder of Bluestar Global Investors LLC, a financial research company focused on Israel and the Middle East, said yesterday by phone from San Francisco. “Yet overall, markets have reacted with the knowledge that Israel’s companies and its economy have gone through this before and that it’s very unlikely to have anything but a very short- term impact.”

Israel’s five-year credit-default swaps rose 6.8 basis points to 158.5 basis points, the highest level since Sept. 6, London prices compiled by Bloomberg show. The securities traded 11 basis points above those for Turkey, which were little changed. That reverses an eight-year trend, when Israeli swaps cost an average of 130 basis points less.

‘Escalation’

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Israel is rated A by Fitch, the sixth-highest investment grade, while Turkey was lifted to the lowest investment grade level of BBB- on Nov. 5.

The shekel dropped 0.2 percent to 3.9764 per dollar, making it the worst performer among 10 emerging-market currencies in Europe, Middle East and Africa tracked by Bloomberg.

“There obviously has been a change in the dynamic to the fighting, so over the weekend, the fighting either winds down or there could be an escalation,” Zach Herzog, the head of international sales at Psagot Investment House Ltd. in Tel Aviv, said by phone. The Israeli Exchange is closed today and tomorrow for the weekend.

Blue Square, based in Rosh Ha’Ayin, tumbled 8 percent to $2.20, the lowest since September 2011. The supermarket chain’s Tel Aviv shares dropped for a sixth day, losing 2.6 percent to 8.97 shekels, or the equivalent of $2.26.

SodaStream, Tower

SodaStream, the maker of soda machines, sank 3 percent to $34.08, a five-month low.

Tower Semiconductor Ltd. (TSEM:US), the Israeli maker of customized chips, climbed the most in two weeks, adding 2.2 percent to $7.46. The shares in Tel Aviv slid 0.4 percent to 29.47 shekels, or $7.41.

Chief Executive Officer Russell Ellwanger said in an interview yesterday that the company will see a “definite” rise in revenue next year as it starts production of recent design orders.

Tower yesterday reported a 12 percent drop in third quarter revenue to $154.6 million and a loss of $18 million compared with a profit of $1.84 million in the same quarter a year earlier. The mean estimate of three analysts surveyed by Bloomberg was for sales of $157 million.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • BSI
    (Alon Blue Square Israel Ltd)
    • $2.73 USD
    • 0.05
    • 1.67%
  • SODA
    (SodaStream International Ltd)
    • $21.0 USD
    • -0.09
    • -0.43%
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