Tel Aviv Stocks Close Mixed as Institutions Buy Tech Dips Ahead of Elections
The Tel Aviv Stock Exchange closed mixed as institutional investors bought technology dips while foreigners shifted to traditional assets. The Bank of Israel held rates steady at 3.25% amid strong GDP growth forecasts.
The Tel Aviv Stock Exchange wrapped up a mixed trading week ahead of a shortened schedule due to the upcoming general election on Tuesday. The TA-90 index led the positive trend with a weekly gain of approximately 2.1%, bringing its monthly accumulation for October to 2.2%, whereas the benchmark TA-35 index dropped by about 2.4% and the broader TA-125 index shed roughly 1.4%.
Technology Sector Pressured as Institutional Investors Buy the Dip
Trading activity was heavily anchored by the technology sector, which faced headwinds from Wall Street sentiment regarding AI infrastructure spending and monetization concerns. The TA-Technology index fell 3.7% over the week, bringing its monthly decline to 6.4%, while the elite TA-Tech Index slipped 1.4%. However, divergence was visible beneath the surface: the TA-Software index advanced 3.4% and the TA Communications and IT index rose 3.5%. Outside tech, the TA-Construction index surged 4.6% and the TA-Insurance index climbed 2.4%, extending its year-to-date return to 45.1%.
These dynamics exposed stark differences in strategy between institutional and foreign investors. Local institutional players channeled net purchases of roughly 399 million shekels into domestic equities this week, bringing their year-to-date total to 5.9 billion shekels. Most of these funds, about 451 million shekels, were directed toward the pressured technology sector, alongside 172 million shekels into insurance stocks. Notable single-stock inflows targeted Elbit Systems, Tower Semiconductor, and Next Vision.
Foreign Investors Pivot to Traditional Assets and Defensive Plays
Conversely, foreign investors trimmed their exposure to local equities, recording net sales of approximately 157 million shekels. Overseas participants cut holdings in technology and insurance while redirecting capital into traditional domestic sectors, pouring net purchases of 90 million shekels into real estate and construction, and roughly 79 million shekels into banking shares.
Meanwhile, the broader public continued channeling capital abroad, pouring 124 million shekels into foreign-focused exchange-traded funds. Mutual funds experienced heavy inflows totaling 8.2 billion shekels net, pushing industry assets to a record 858.1 billion shekels, driven largely by institutional allocations into S&P 500 tracking funds and monetary funds.
Monetary Policy and Robust Macroeconomic Growth
On the macroeconomic front, the Bank of Israel held its benchmark interest rate steady at 3.25% following three consecutive cuts. Policymakers adopted a cautious stance amid a 3% depreciation of the shekel against the dollar since September, alongside surging Brent crude prices that climbed from $109.86 to $116.72 per barrel, raising imported inflation risks. Political uncertainty surrounding the election also prompted the central bank to postpone its expected rate reduction to 3.0% from the second quarter to the third quarter of 2027.
This monetary pause comes against the backdrop of robust growth projections from the central bank's research department. Israel's total GDP is forecast to expand by 5.6% in 2026 and 7.5% in 2027. Even excluding external manufacturing components, domestic growth is estimated at 3.4% this year and 5.2% next year, significantly outpacing projected growth in the United States, Europe, and global averages.
