Israeli shares sank to the lowest level in almost two months as the country’s military struck 50 targets by air and sea in the Hamas-controlled Gaza Strip following overnight rocket attacks.
The benchmark TA-25 Index (TA-25) declined 1 percent to 1,366.02 at the close in Tel Aviv, the lowest level since March 9. Israeli troops have amassed along the Gaza border and the cabinet approved the call-up of 40,000 reservists for a possible ground operation following a barrage of Palestinian rocket fire into its territory.
“There is a lot of uncertainty in the market and people don’t know if the events will escalate in the next coming days,” Yaniv Pagot, the chief strategist at Ramat Gan, Israel-based Ayalon Group Ltd., said by telephone today. “If the escalation continues then there are concerns of a hit to the economy, as reservists won’t come to their office jobs and the local tourist industry will suffer.”
Gaza militants began bombarding southern Israel after the kidnapping and killing of three Israeli teenagers last month led to a roundup of Hamas operatives in the West Bank. Prime Minister Benjamin Netanyahu has blamed the deaths on Hamas. The attacks increased after the killing of a Palestinian teenager in Jerusalem last week.
“We are preparing a campaign against Hamas, which will not end in just a few days,” Israeli Defense Minister Moshe Ya’alon said in an e-mailed statement. “We will not tolerate rocket fire at Israeli communities, and we are prepared to expand the campaign by every means at our disposal.”
The Manufacturers Association of Israel has set up a round-the-clock center to help 500 factories within a 40-kilometer (25-mile) radius of Gaza, according to an e-mailed statement. The “war room” will help factories deal with direct hits to buildings, a shortage of workers and raw materials, power outages and transportation issues. As much as 20 percent of laborers aren’t showing up to work, according to the association’s Director Meir Shimko.
“We’re still trying to do everything so that factories continue to run, even with partial amount of workers,” Shimko said by telephone from Kibbutz Beit Kama in southern Israel. “We don’t want to get to a point where everything closes down and we all leave.”
The benchmark’s 14-day relative strength index has dropped to 32.1 from 48.6 on July 6. A level below 30 indicates to some analysts the stocks are oversold and are poised for a rebound. About 7.8 billion shekels ($2.3 billion) of shares traded so far today, exceeding the 12-month daily average of 5 billion shekels, according to data compiled by Bloomberg.
“The longer this keeps going on, the higher the chances for a wide-scale army operation, for a ground operation, for rockets to strike the Tel Aviv area,” said Effi Cohen, a bond trader at Leader Capital Markets Ltd., said by telephone from Tel Aviv. “People are now asking themselves ‘why take the risk?’”
OPKO Health Inc. led the declines, falling 4.1 percent, to 29.17 shekels. Global health-care provider Perrigo Co (PRGO:US) Plc followed, sliding 3.7%, the most since May 7, to 511.60 shekels.
Israeli stocks have historically recovered from retreats caused by security concerns. While the TA-25 sank to an eight-month low during the second Lebanon war, which started in July 2006, it ended the year at almost a record high.
“In a scenario in which fighting in the south leads to a Palestinian uprising and attacks in the center of the country, the impact on the economy and on the stock market will be far more significant,” Ori Greenfeld, chief economist at Psagot Investment House Ltd., said in an e-mailed note today. “That is not our working assumption.”
The yield on the benchmark 10-year bond closed little changed at 2.93 percent. The shekel weakened less than 0.1 percent to 3.43 per dollar. The currency strengthened 6.8 percent in the past 12 months, the sixth-best performer among 31 major counterparts tracked by Bloomberg.
“The impact on the shekel will be, as usual, short and insignificant compared to the volatility in global foreign currencies,” Greenfeld wrote.
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