Bloomberg News

Netanyahu Sinking Volatility as Polls Show Win

January 19, 2013

Israeli stocks are posting the smallest price swings in a month on speculation Prime Minister Benjamin Netanyahu will win re-election this week and maintain the government’s policies to boost competition and spur growth.

Ten-day volatility on the benchmark TA-25 stock Index fell to 9.98 on Jan. 17, the lowest level since Dec. 13, as price swings for the Bloomberg Israel-US Equity Index (ISRA25BN) of the largest Israeli companies traded in New York retreated to the lowest since November 2010. The gauge gained 0.8 percent last week to 86.54 as Nova Measuring Instruments Ltd. (NVMI:US) and Nice Systems Ltd. (NICE) jumped 10 percent or more.

The last Israeli election polls allowed by law before voting on Jan. 22 show Netanyahu, 63, garnering enough support to form a new government coalition, according to a survey published on Jan. 18 in the Yediot Ahronot daily. The TA-25 Index has rallied 67 percent during the term of the premier’s government, which spurred competition in the telecommunications industry, initiated steps to break the nation’s biggest monopolies and reduced the unemployment rate.

“It is quite clear who’s going to be the next prime minister, meaning uncertainty is not really a factor,” Daniel Rapoport, head of equity and derivatives at Bank Leumi Le-Israel Ltd., said by phone from Tel Aviv on Jan. 17. “Netanyahu is pro-business, he’s considered the proper market person and a true capitalist.”

Netanyahu’s Likud-Beitenu parliamentary list, which he formed by combining his Likud party with former Foreign Minister Avigdor Liberman’s Yisrael Beitenu faction, will win 32 seats in Israel’s 120-seat Knesset, Yediot said. Likud-Beitenu will garner 35 seats in a survey in the Maariv daily.

Economic Concentration

Netanyahu’s government has forced telecommunications providers to cut fees and has encouraged new players to the market in order to increase competition for the biggest providers, Cellcom Israel Ltd. (CEL:US) and Partner Communications Co. The two companies were the worst performers in the Bloomberg Israel-US gauge in 2012.

The Communications Ministry said on Jan. 10 that it’s planning a “wholesale” fixed-line market and a fibre-to-the- home network that will compete with existing operators.

The prime minister set up a committee to look into the high level of concentration in the economy after the Bank of Israel said in its 2009 annual report that some 20 families control 25 percent of the listed companies and 50 percent of the total market share in the Tel Aviv Stock Exchange.

The council recommended last year that companies limit their pyramid structure to no more than three public layers and reduce cross-holdings in financial and industrial businesses.

‘Same Policies’

“The same policies that were managed until now will continue with the next government,” Rapoport said.

Unemployment in Israel fell to 6.7 percent in November from 6.9 percent the previous month, according the the Bureau of Statistics. The Bank of Israel forecasts gross domestic product growth of 3.8 percent in 2013.

While the TA-25 Index (TA-25) surged during Netanyahu’s term, the benchmark index trails the 89 percent gain of the Standard & Poor’s 500 Index and a 75 percent advance by the MSCI World Index during the same period. Volumes on the TA-25 fell 41 percent below the 30-day average on Jan. 17, according to data compiled by Bloomberg.

Netanyahu, who has served twice as Israel’s premier, cited his inability to get partners to agree on spending cuts for 2013 as a reason for calling early elections on Oct. 9.

“In forming a coalition, there’s negotiations that have to take place, and the more parties you have to pull into it, the trickier it’s going to be,” Alastair Newton, a senior political analyst at Nomura International Plc in London, said by phone on Jan. 18.

Nova, Nice

Israel has 54 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.

Caesar Stone Sdot Yam Ltd. (CSTE:US) jumped 4.2 percent $18.16, the highest close on record, on Jan. 18. The Israeli producer of quartz-based countertops was raised to outperform from neutral at Credit Suisse Group AG.

Nova Measuring Instruments Ltd. added 4.9 percent to $8.83, capping a 12 percent rally for the week. Shares in Tel Aviv rose 5.2 percent to 31.26 shekels, or $8.38, in the five days to Jan. 17. Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, forecast on Jan. 17 record capital spending in 2013 and first-quarter sales surpassing analysts’ estimates on strong demand.

Nice Systems added 10 percent to $38.11 in the week, the biggest gain in 15 months, on speculation it would acquire competitor Verint Systems Inc. (VRNT:US) The two companies make technology designed to monitor call-in centers as well as video networks that observe public spaces. Shares in Tel Aviv added 4.7 percent to 137 shekels, or $36.74.

To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net

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


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Companies Mentioned

  • NVMI
    (Nova Measuring Instruments Ltd)
    • $11.29 USD
    • 0.39
    • 3.45%
  • CEL
    (Cellcom Israel Ltd)
    • $12.21 USD
    • -0.13
    • -1.06%
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