Tel Aviv Stock Exchange Struggles Near Correction Territory as Analysts Debate Buying Opportunities
The Tel Aviv Stock Exchange remains 10% below its peak amid global semiconductor slumps and domestic pressures. While historical data suggests corrections offer strong forward yields, analysts remain divided on whether current conditions present an immediate buying opportunity.
The Tel Aviv Stock Exchange has experienced a marked slowdown over the past six months. Following an extraordinary two-year rally that saw major indices more than double in value, the market failed to sustain its momentum, undergoing a rapid correction and dropping over 10% by last June. Since then, the local bourse has struggled to regain upward traction, with recurring red sessions returning the market to a level 10% below its recent peak.
Market Pressures and Historical Context
Six months ago, the downturn was largely driven by market disappointment following Operation Roar of the Lion against Iran, which did not result in regime change, alongside approaching political elections in Israel. More recently, the Tel Aviv market has tracked sharp global declines in semiconductor stocks, with local chipmakers losing nearly a third of their valuation. This trend has coincided with broad pullbacks across defense contractors, banking, insurance, and real estate equities.
According to Matan Shitrit, chief economist at Phoenix Holdings, historical data shows that the TA-125 index drops by more than 10% at least once a year on average, making the current correction a routine market phenomenon. Data indicates that a drop exceeding 20%—entering a bear market—occurs roughly once every four years. Six months after a 10% correction, historical average returns stand at 3.6%, climbing to 5% after one year. Waiting out the market to reach its absolute trough historically yields average gains of nearly 27% over six months and 37% over a year.
Divergent Analyst Views on Buying the Dip
Yaniv Pagot, head of trading at the Tel Aviv Stock Exchange, cautions against attempting to time the market. "The problem is that we do not receive an SMS notification on our phones when the market hits rock bottom," Pagot notes. He points out that volatility remains moderate, with the Tel Aviv fear index standing at 22 points, and crucially, mutual funds are seeing no capital outflows. While conditions do not signal panic or an immediate buying frenzy, Pagot warns against panic selling.
In contrast, Kobi Segev, managing partner at Accord Investment House, views current valuations as an attractive entry point. "Leading indices have dropped by 10%, and the TA-90 has fallen by roughly 20%, yet business activity remains robust with positive corporate earnings and M&A announcements," Segev states. He argues that second-tier stocks are now priced reasonably for investors seeking to increase market exposure.
Tamir Fishman Investment House echoes the sentiment that asset pricing is becoming increasingly attractive, though emphasizing patience over market timing. Analysts advise focusing on quality companies at fair prices rather than attempting to guess the absolute bottom, reinforcing that equity investing is a multi-year marathon rather than a short-term sprint.
