Tel Aviv Stocks Slip on Election Uncertainty While Shekel Strengthens

The Tel Aviv Stock Exchange (TASE) research unit published its weekly review, highlighting market caution ahead of the upcoming elections in Israel amid record highs on Wall Street.

Stock Market Pressures and Sector Performance

The TASE experienced sharp declines this week, driven by rising political uncertainty ahead of the elections, security escalation fears, and global bond market pressures. Wall Street, meanwhile, continued trading near historic peaks.

The TA-125 index dropped by 3.6% over the week, the TA-35 lost 3.7%, and the TA-90 weakened by 3.3%. Despite the weekly losses, the TA-35 and TA-125 still reflect year-to-date positive returns of 11.9% and 7.2%, respectively. Sector-wise, insurance continues leading yearly yields with a 34.8% surge, while defense, biomed, and construction indices led the weekly declines.

Investor Flows and Bond Yields

Average daily trading volume in stocks totaled approximately 4.7 billion NIS this week. Foreign investors emerged as the largest net buyers in the stock market, recording roughly 672 million NIS in net purchases, primarily targeting insurance shares (approx. 266 million NIS), biomed (approx. 150 million NIS), and banks (approx. 140 million NIS).

"The Tel Aviv Stock Exchange recorded sharp declines this week on the back of rising political uncertainty heading into the elections, security concerns, and global debt pressures, while Wall Street hovered near all-time highs."

Institutional investors expanded their technology exposure by purchasing about 308 million NIS in net shares, alongside selling roughly 323 million NIS in net ETFs and reducing stakes in insurance and biomed. The public further increased global market exposure by purchasing approximately 195 million NIS in foreign funds this week, bringing the yearly total to about 3.5 billion NIS.

Currency Strength and Government Borrowing

The local foreign exchange market defied global trends as the shekel strengthened. The representative dollar rate dropped by about 0.8% to 3.055 NIS per dollar, completing a 4.2% year-to-date decline. Meanwhile, the euro fell by roughly 1.5% to 3.429 NIS, and the British pound weakened by 0.9% to 4.044 NIS.

Concurrently, the Ministry of Finance actively pursued debt issuance, raising about 115 billion NIS year-to-date and targeting approximately 123 billion NIS by the end of October. The state budget deficit remained stable at roughly 3.2% of GDP, with 69.7% of the state budget executed by the end of September.