Migdal Capital Markets chief investment manager Yaakov Weinstein says the present situation of global markets is “very interesting”. He added, “We’re at the final stage of the present wave of market growth.” He made the remarks at a company conference today.
Weinstein predicts, “I believe that we have another year or two of growth, and that it will end around the time of the US elections in November 2008. It will probably occur in the period between the Olympic Games and the elections. The Olympic Games is still driving growth in China, but they will mark the peak in the upbeat mood in the Chinese economy.”
As for the Israeli capital market, Weinstein predicts that it will share the fate of the global market. “Cutting the shekel interest rate to 3.5% was designed solely to halt the appreciation of the shekel. In retrospect, it turns out that there was no reason to cut the interest rate. Although the mission succeeded, it had a price. In the end, we’ll get a much weaker market than we had before. The shekel will continue to fluctuate, but this time downwards. When this is over, the Bank of Israel will have to raise the interest rate, but this time we won’t see a rush of foreign investors.”
Weinstein says the key for understanding the current investment world is the conduct of private equity funds. “Whereas before, hedge funds were considered an alternative investment channel, today private equity are the market goodies.
“Technical support for the bull market came from the current high liquidity in the markets, and not necessarily from companies’ profitability. The hunger of every investment manager in the world for risk has greatly increased in order to reap the highest yields.
“The outperformance of Israel’s capital market will disappear because companies’ multiples are not as low as before, and growth is weakening. Israeli investment managers’ appetite for risk is also rising. Ultimately, the market will settle and managers will become a little more conservative because there’s a price for chasing after yields. In mid-2008, we’ll see the markets stop for a correction and time-out. This will be followed by a new bull market.”
Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) and Bear Stearns Companies Inc. (NYSE:BSC) own Migdal Capital Markets in equal shares.
Published by Globes [online], Israel business news - www.globes.co.il - on June 25, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007