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It could also be an opportunity: an analysis of the stock market situation in Tel Aviv

While Wall Street is recording corrections for the aggressive increases from the summer, in Tel Aviv the stock market situation is due to the problematic treatment of Corona.

It is quite clear that it will be worse before it gets better, but the prices in Ahad Ha'am justify monitoring.

Dudi Resnik, Leumi Capital Markets' interest rate strategist, with commentary

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• Wall Street

• The Tel Aviv Stock Exchange

Dudi Resnik

Thursday, 24 September 2020, 11:50

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In the video: Restrictions on prayers during the holiday closure (Photo: Reuters)

September, which enters its last line, marks "Black September" in the world's stock markets.

Earlier this month, the major share indices lost US between 6 and 10 percent, when Israel similarly decreased leading indicators. In Europe, however, the situation is better, with an average decline of 2-4 percent (as of this morning, before the start of trading).

USA "B, the correction in stock prices may seem sharp and violent, but it should be remembered that it comes after a sharp rise in prices, which began at the end of March and seems to have ended (at this stage at least) at the beginning of the current month.

During this period (from the end of March to the beginning of the declines in September), the S&P 500 completed a 60% increase, no less.

This morning, after yesterday's declines on Wall Street, the index returned near its level at the beginning of the year - still about 45% above the low recorded at the height of the downturn in the corona crisis.

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Violent Correction For Violent Correction.

Wall Street (Photo: Reuters)

In Israel, on the other hand, the sharp declines since the beginning of the month are a continuation of a trend that has continued almost non-stop since the beginning of the crisis at the end of February.

Since the beginning of the year, the Tel Aviv 125 index has fallen by nearly 20 percent, leading to a drop of more than 35 percent in the banks and real estate indices.

This morning, with the opening of trading in Tel Aviv, there are relatively moderate declines of about half a percent to one percent. As an expression of the fact that the domestic market is relatively "cheap" against the background of declines since the beginning of the year.However, Israel's risk premium is rising and as an expression of this the weakening of the shekel against the dollar, to 3.48 shekels to the dollar. Yes, the upward trend in long-term government bond yields of 10 years or more continues - with the rise in bond yields reflecting an increase in the risk premium (investors "demand" a higher return in order to compensate for the risk as they perceive it).

The underperformance of the domestic market reflects Israel's poor response to the corona virus, amid a sharp rise in morbidity in recent weeks, and in fact being the first country in the Western world to enter a second general closure.

Entering a second closure intensifies fears that the fourth quarter of the year will be similar to the second quarter, with a significant drop in GDP.

In fact, we are approaching the pessimistic scenario of the Bank of Israel, which indicates a 7% decrease in GDP this year, with a significant increase in the government deficit and the level of unemployment.

In addition, it seems that the expected recovery in 2021 seems less and less certain against the background of the lack of control of the corona virus.

Will the red turn green?

Not so fast.

The Tel Aviv Stock Exchange (Photo: Reuven Castro)

Dudi Reznik (Photo: Kfir Sivan)

Globally, the US election (early November) is also a risk point for world stock markets, due to the fact that it is not clear what the results will be and beyond that - the choice of a significant part of it is likely to be in the mail, which could significantly delay the results. Of uncertainty about the identity of the winner, especially in a scenario where polls point to a close

battle.Therefore, it seems that in the short term the negative sentiment may be dominant and lead to the continued negative trend of price declines in the domestic market as well as worldwide The trust, similar to the scenario we witnessed in March this year, when redemptions of more than NIS 25 billion were recorded from local mutual funds. However, it should be remembered that the pricing of the local market is quite reasonable and some even say cheap in some sectors. ) Therefore, in the medium-long term, and for those who have a long breath, it seems that the current price levels are quite reasonable for a gradual entry into the local stock market.The

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