The Tel Aviv Stock Exchange, on the rise after a year of war

The Tel Aviv Stock Exchange has gone through a period marked by volatility since October 7, 2023, but despite this, investors have maintained a cautious optimism, according to an article published yesterday by the website www.calcalist .co.il. The source cited shows that since the outbreak of the war on October 7, 2023, the Tel Aviv 35 index has increased by 14.1%, while the Tel Aviv 125 index has increased by 12.2%. Despite the uncertainties, real estate and banking stocks finished the year higher.

One of the reasons for investors' moderate optimism is, according to financial experts consulted by the cited source, the resilience of the Israeli economy despite the conflict in Gaza. Economic activity has not been drastically affected, as shown by data on credit card usage and shopping center sales, which have returned to pre-war levels. A significant number of listed companies have also recovered, posting even higher profits than before the conflict. However, the Israeli economy paid a high price. The budget deficit rose to 8.3% and international rating agencies downgraded Israel's ratings. Persistent inflation and high government spending kept pressure on the economy. Even so, the banking sector grew by 9.3%, while the real estate sector grew by 14.7%.

In addition, the bond market, which was initially affected by the events of 7 October 2023, has seen significant activity over the past 12 months. Thus, bond issues rose considerably, by tens of percent, in an attempt to partially cover the massive increase in government spending, and the average daily turnover in the government bond market reached almost 3.5 billion shekels, representing an increase of more than 30% compared to October 7, 2023. The evolution of government bonds was marked by a sharp decrease in their value, especially for long-term issues, which led to a significant increase in yields. This reflects the high level of risk associated with the Israeli economy, as well as the minimal chances of an interest rate cut in the coming months. It is not only fiscal policy that has contributed to the exclusion of interest rate cuts from the government's agenda, but also persistent inflation. At the close of the last trading day before the massacre on October 7, 2023, the 10-year Israeli bond yield was 4.26%.

• Defense industry companies, impressive gains on the Tel Aviv Stock Exchange

In terms of companies listed on the Israeli stock exchange, the stars were the companies in the defense industry, although different developments were recorded. For example, over the past 12 months the value of Elbuit Systems' shares has fallen by 2.8%, despite the company's strong financial results, while the value of Next Vision's shares has increased by 70%. Elbit Systems is the largest defense company listed on the Tel Aviv Stock Exchange, with a market value of 34 billion shekels, and the company is also traded on the US stock exchange. Elbit Systems reported revenue growth of 12% in the second quarter of 2024, and its backlog reached a record $21 billion. The decline in Elbit Systems shares is attributed to the global political and economic context. The company, which supplies military equipment to the Israeli Defense Forces (IDF) and the Israeli Ministry of Defense, has become the target of anti-Israel campaigns and the BDS (Boycott, Divestment, Sanctions) movement. CEO Bezalel Machlis said actions such as the massive sale of shares by Bank of Nova Scotia, a former major investor, contributed to the decline.

Razor Labs, a software and artificial intelligence company, saw an impressive 697% growth during the conflict. The company, which provides AI solutions for automatic ammunition quality control, has a market value of 167 million shekels. Beit Shemesh Engines, which makes aircraft engines and is majority owned by the Fimi Fund, also saw a 168% increase in the past year to NIS 2.3 billion. Other defense companies also experienced increases: Orbit Systems (19%), Imco (174%) and Arasal (26%).

Internationally, foreign markets, especially the American one, positively influenced the stock exchange in Tel Aviv. The S&P 500, Dow Jones and Nasdaq are up 34%, 28% and 36% respectively over the past 12 months.