In its weekly market survey, Union Bank writes, “We still believe that price levels on the Tel Aviv Stock Exchange (TASE) have peaked, and what is driving the market is the surplus of liquidity, low interest rates, and good macroeconomic data. We therefore recommend reducing holdings in Israeli stocks, and increasing holdings in foreign stocks.”
Union Bank believes that the Bank of Israel will not cut the interest rate from its current 3.5%. The bank has revised its inflation forecast upwards, predicting that the Consumer Price Index (CPI) will fall by 0.2% in May, and by 0.1% in June, but that it will rise by 0.1% in July.
The bank also predicts that the shekel-dollar exchange rate slightly will rise in the near term, in line with the dollar’s change against leading international currencies. The bank says that the shekel-dollar exchange rate will range between NIS 4.07/$ and NIS 4.20/$ this week.
Bank Hapoalim is more bullish than Union Bank. It believes that prices on the TASE will continue to climb during the second half of 2007. However, in view of possible profit taking in the short term, caution is warranted, including the use of put options.
Bank Hapoalim noted that the public’s exposure to the TASE has increased in recent months, although “there has been no stampede for direct holdings in stocks.” Currently, 14% of the public, excluding parties at interest, currently owns TASE shares.
The bank says that the short-term loan yield curve strengthens its assessment that no interest rate cut is likely in the near future.
Published by Globes [online], Israel business news - www.globes.co.il - on June 10, 2007
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