Less but painful: how do you sum up 2022 at the Tel Aviv Stock Exchange? - Walla! Of money

Summary of 2022 in the stock market: declines in the leading indices.

Only the index of oil and gas companies and partnerships jumped (Photo: Reuven Castro)

The stock indices demonstrated resilience relative to the rest of the world, there was an increase in trading turnover and the entry of foreign investors.

The number of companies traded on the stock exchange is the highest in the last decade and stands at 548 public companies, of which 52 are dual - that's all the good news.

The Tel Aviv Stock Exchange summarizes the year 2022, a year that was very difficult for the capital markets around the world and leaves us, somewhat like in the case of inflation, with relative comfort: yes, the declines in leading indexes hurt Tel Aviv this year, but when compared to the situation in the world's stock markets, it turns out that we Still in good condition.

Here are the main points:

• The Tel Aviv-35 and Tel Aviv-125 indices fell by about 8% and about 10% respectively, compared to the MSCI world index which fell by about 19%.

• The Tel Aviv-Oil and Gas index jumped by about 39% due to the effect of the jump in the price of natural gas and an increase in demand for the purchase of natural gas from Israel.

• In the last five years 2018-2022, the Tel Aviv-Technology index leads with an increase of about 79% and the Tel Aviv banks indices -5 and "A-Ndel"

• The daily trading turnover in shares amounted to approximately NIS 2.3 billion in 2022 - approximately 24% higher than the turnover in the previous year and the highest turnover since 2011.

• In 2022, the entry of foreign investors into the stock market increased, who purchased, net, shares in the amount of approximately 13 billion NIS on the Tel Aviv Stock Exchange.

In 2022, approximately NIS 21.8 billion was raised from the public in the stock market, following a record raising of approximately NIS 25.8 billion the previous year. 22 new companies were registered on the stock market, with a total value of approximately NIS

25.8

billion.

The number of companies traded on the stock exchange stands at 548 listed companies - the highest since 2012, of which 52 are dual companies.

This year, interested parties sold shares worth about NIS 6.4 billion and on the other hand bought shares worth about NIS 2.5 billion.

• An increase of about 14% in the turnover of corporate bonds which amounted to about NIS 1 billion, due to the volatility in trading.

A decrease of about 19% in the daily turnover of government bonds, which amounted to about NIS 2.4 billion per day, due to the end of the bond purchase program by the government and a decrease in the activity of foreign investors.

This year, about NIS 90.3 billion was raised in bond issues Companies for the public and institutions, following a record raising of approximately NIS 95 billion the previous year.

This year the financial sector raised a record amount of NIS 35 billion in bond issuances, about 6% higher than the amount raised in 2021.

529 basket funds and 39 foreign funds that are also traded abroad are traded on the stock exchange, in the value of aggregate public holdings of about NIS 101 billion.

• Due to the effect of the increase in interest rates in the economy, the public transferred approximately NIS 28 billion to the financial funds in the months of April to December 2022.

• An increase in trading cycles in options on the Tel Aviv-35 index due to the effect of volatility in stock trading.

A year of red screens, but also with some optimistic points (Photo: Reuven Castro)

Trading on the Tel Aviv Stock Exchange was characterized by great volatility and amounted to price decreases in the stock and bond markets, similar to the trend in leading stock exchanges in the world, when the Israeli market demonstrated resilience and the stock and bond indices in Tel Aviv fell at a moderate rate significantly relative to the rest of the world.

The declines in rates in the world markets were affected by an inflationary outbreak that resulted in continuous aggressive interest rate increases by central banks and a slowdown in economic activity.

Overview of trading activity - 2022:

- resilience in the Israeli market with decreases at a moderate rate that is significant relative to the world

In the summary of 2022, the Tel Aviv-35 Index and the Tel Aviv-125 Index fell by about 8% and about 10%, respectively, compared to the S&P 500 and Dow Jones indices in the USA which fell by about 18% and about 9%, respectively, and the EURO STOXX 50 indices in Europe and the MSCI world which fell by about 11% and about 19%, respectively (data from foreign exchanges in local currency).

In a five-year analysis for the years 2018-2022, the Tel Aviv-Technology Index leads with an increase of about 79% and the Tel Aviv Banks-5 and Tel Aviv Real Estate indices with an increase of about 66% on average.

, led by the real estate company indexes, which are made up of companies that are greatly affected by the interest rate increase. by about 23%. In the last five years 2018-2022, the Tel Aviv Real Estate index rose by about 63%.

The indices of high-tech companies fell in line with the global trend. The Tel Aviv Global-Bluetech index fell by about 36% and the Tech-Elite index decreased by about 30%,

following the eradication of the epidemic and the increase in interest rates all over the world, which has a particularly negative effect on growth companies.

As a result, high-tech companies around the world and in Israel began to reduce the number of employees.

It should be noted that in the last five years 2018-2022, the Tel Aviv-Technology Index leads an increase of about 79%. The

of about 4% this year following a jump of about 68% the previous year.

The decrease in the index due to the expectation of a slowdown in the economy was offset by the positive effect that the increase in profitability and financing income of the banks had, due to an increase in the amount of credit they gave mainly to apartment buyers and the increase in the interest rate.

Following the jump of about 62% the previous year, mainly in light of the sharp increase in energy prices, with a jump of about 91% in the price of natural gas and the growing demand for purchasing natural gas from Israel.

It should be noted that the price of Brent oil jumped by about 55% in the first half of the year, and in the second half of the year it decreased and was slightly higher than the level it was at the beginning of the year, due to the effect of a slowdown in global economic activity and the decision of the European Union and the G7 countries towards the end of the year on a maximum price of 60 Dollar per barrel of Russian oil as of December 5, 2022.

Trading in the stock market was characterized by brisk trading cycles and amounted to approximately NIS 2.3 billion per day - about 24% higher than the turnover in 2021 and the highest turnover since 2011. Contributing to the brisk trading cycles this year were: the volatility in stock prices and the increased activity of foreign investors in the stock market in Tel Aviv.

Bank of Israel data shows that in the months of January-September 2022, non-residents purchased, net, shares totaling approximately NIS 13 billion on the Tel Aviv Stock Exchange, after purchases of a similar amount throughout 2021.

As a reminder, the stock exchange lowered the minimum order size starting on March 1, 2022 , from NIS 5,000 per share in the Tel Aviv-35 index

and from NIS 2,000 per share in other indices, to NIS 500 per share, a move that contributed immediately and significantly to increasing liquidity in the market and to an increase in the volume of small orders, both by the private investor and by Market makers and quote generators.

The number of companies on the stock exchange: at the end of the year, 548 listed companies were traded on the stock exchange - the highest number since 2012 and an increase of 7 companies compared to the number at the end of 2021.

A total of 22 new companies were added to the stock market this year, with a total value of approximately NIS 25.8 billion: 13 companies News that issued this year (about NIS 13.5 billion, after the issue), 6 companies that entered into a listed company (about NIS 1.1 billion), and 3 companies that registered without recruitment (two companies that made a double registration and a company that split - about NIS 11.2 billion) On the other hand, 9 companies were deleted from the stock exchange, including three companies that were merged with a listed company and their deletion does not affect the stock exchange coverage.

Of the traded companies, 52 dual companies are traded in Tel Aviv and their shares are simultaneously traded abroad.

Of the dual companies - two companies listed their shares for trading this year in Tel Aviv as part of the dual listing - the foreign real estate company U.M.H. Rada, whose shares are traded on Nasdaq, is merged with Leonardo D. R. S. (foreign).

Rada shares were deleted from trading in Tel Aviv and Nasdaq and Leonardo shares (symbol DRS) were listed for trading in both markets.

In addition, the three high-tech companies traded in Tel Aviv were registered for parallel trading on the NASDAQ stock exchange in the USA - the shares of the cleantech company - Barnmiller, the technology company Cybervan and the fintech company Nikes.

Along with this, 4 dual companies were deleted from trading in Tel Aviv - the shares of the real estate company Maniv Abroad Optibase were deleted from trading in Tel Aviv and Nasdaq following a purchase offer by the Capri family fund, the controlling owner of the company and 3 companies deleted their shares from trading In Tel Aviv only:

- the rate of public holdings in shares reached about 62% at the end of the year.

In 2022, net sales of shares continued by interested parties, who sold shares worth approximately NIS 6.4 billion, and on the other hand bought shares worth approximately NIS 2.6 billion.

- amounted to approximately NIS 21.8 billion, after a record raising to the extent of approximately NIS 25.8 billion in 2021. The decrease in the amount of fundraising this year was due to a halt in the wave of initial public offerings in April 2022, similar to the situation in the world. In total in 2022, 13 new companies (including 6 high-tech companies) raised approximately NIS 2.3 billion in initial public offerings (IPOs).

The decline in the markets that reduced the appetite for new investments resulted in the fact that most of the new companies that managed to complete the IPO are large companies (with a value of more than a billion shekels after the IPO).

Five large new companies raised about 2 billion shekels - about 84% of the total raised in initial public offerings in 2022, this is compared to 12 large companies who raised about 4.6 billion shekels - about 43% of the total raised in initial public offerings in 2021.

The five largest companies that issued are : Akro Group worth about NIS 4 billion after the IPO, Shikhon and Binui Energy worth about NIS 2.8 billion after the IPO, real estate worth about NIS 2 billion after the IPO collapsed, a house and roof worth about NIS 1.3 billion after The offering, and Imagest - a company that provides satellite photography and interpretation services, which carried out a global offering (to local and international institutional investors) led by the foreign underwriter UBS - worth approximately NIS 1.2 billion after the offering.

There was an increase in the recruitments of the old companies and they amounted to about 19.5 billion shekels in 2022, compared to about 15.3 billion shekels the previous year.

The bulk of the increase comes from the fundraising by the major banks, Leumi and Discount, which totaled approximately 2.8 and 1.4 billion shekels, respectively, and were the largest share issuances by banks in more than two decades.

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the bonds

The bond market - a record in raising corporate bonds, extremely low raising by the government

Bond trading resulted in rate decreases in most of the leading indices, at a rate of about 7.5% on average. The rate decreases were influenced by the increased expectations for interest rate increases and actual interest rate increases, due to the increase in the inflation rate.

Fixed-interest shekel government bonds, primarily the 10-year bonds stood out with a decrease of about 16%, similar to the trading trend in US government bonds. The exceptions this year are: the foreign exchange-linked corporate bonds included in the Tel Bond index dollar, which rose by about 6% amid volatility, at the same time as the dollar strengthened against the shekel by about 10%, and the shekel government bonds with a variable interest included in the variable Tel Gov index, which rose by about 1%.

in 2022, about 19% lower than the previous year's turnover.

In Shekel government bonds, the turnover amounted to about NIS 1.6 billion, and in index-linked government bonds, the turnover amounted to about NIS 0.9 billion.

The decrease in trading volumes in government bonds was affected by the end of a government bond purchase program by the Bank of Israel at the end of 2021, a quantitative expansion plan undertaken by the Bank of Israel as part of aid to the economy during the corona virus.

Another factor was a decrease in the activity of foreign investors.

This year, purchases of government bonds in Tel Aviv by foreign investors amounted to about NIS 1 billion net in January-September 2022, after purchases totaling about NIS 24 billion in all of 2021, as shown by Bank of Israel data.

On average in 2022, about 15% higher than the turnover in 2021. Volatility in trading contributed to the increase in trading turnover in these bonds.

by the government was stopped, and as a result, a shift of pension funds' investments from these bonds to shares and corporate bonds in Tel Aviv and foreign assets abroad is expected

. 2022 due to the transition to a budget surplus, as shown by the data of the Ministry of Finance.

The increase in government revenues, mainly from taxes, contributed to the budget surplus, along with a decrease in government expenditures due to the end of the aid program for the economy during the corona virus.

The total government recruitment in Israel and abroad this year reached approximately NIS 45.5 billion gross, of which approximately NIS 40.2 billion was in Tel Aviv - compared to a recruitment totaling approximately NIS 104 billion the previous year, and was the lowest recruitment since 2016. We note that this year there was an increase The weight of raising Shekel bonds to about 76% of the amount raised this year in government bond issues in Tel Aviv compared to about 74% in 2021, and at the same time there was a decrease in the weight of raising index-linked bonds to about 24% of the amount raised this year in bond issues government in Tel Aviv compared to about 26% in 2021. The Ministry of Finance's issuances this year were accompanied by redemptions totaling about 65.5 billion shekels in shekel bonds and about 22.5 billion shekels in index-linked bonds.

About NIS 5.3 billion was raised abroad, for the first time since October 2020, through a 10-year euro-linked bond with an interest rate of 0.625% - the lowest to date.

On the other hand, the volume of raisings by corporate bonds from the public in the bond market in Israel (without: TASE UP and structured bonds) broke the record reached in the previous year and amounted to approximately NIS 83 billion in 2022, following the raising of approximately NIS 78 billion in 2021. The pace of fundraising by real estate companies slowed down a bit in the second half of the year due to the increase in interest rates and the increase in financing costs, while the banks' fundraising increased this year and reached a peak. It should be noted that in 2022 the scope of redemptions was approximately NIS 52 billion, and in 2023 it is expected The volume of redemptions to reach about 54 billion shekels.

Huge fundraising was recorded by the financial sector, which this year raised a record amount of about 33 billion shekels from the public, and raised about 1.9 billion additional shekels in institutional bonds traded on TASE UP, compared to about 33 billion NIS raised in 2021, along with a decrease in the amount of real sector raisings which in 2022 raised about NIS 50 billion from the public and about an additional NIS 2.6 billion in institutional bonds traded on TASE UP,Compared to approximately NIS 62 billion raised in 2021.

- 26 new funds, nearly NIS 30 billion were poured into the financial funds in the last 9 months.

In 2022, 26 new basket funds were registered for trading, whose value at the end of the year was approximately NIS 900 million, including 6 basket funds that follow local stock indices with an aggregate value of approximately NIS 95 million, 17 basket funds that track international stock indices with a total value of approximately NIS 700 million.

2 basket funds on local bond indices and one basket fund on commodities with an aggregate value of approximately NIS 90 million.

Today, 529 basket funds are traded on the stock exchange, of which: 88 basket funds on local stock indices and 277 basket funds on international stock indices, 145 basket funds on local bond indices, and 18 basket funds on international bond indices and commodities.

, when for the first time this year - the aggregate value of the basket funds on local stock indices (about NIS 39 billion) is higher than the aggregate value of the basket funds on international stock indices (about NIS 33 billion).

The excess return of the stock indices in Tel Aviv over foreign indices that started in 2021 and continues to date contributed to this.

295 of the basket funds, with a total value of approximately NIS 33 billion, track international stock and bond indexes and commodities.

In addition, 39 foreign funds are traded on the Tel Aviv Stock Exchange, issued by three leading international entities, "Blackrock", "Lixor" and "Invesco".

These funds are also traded abroad at the same time. The aggregate value of the public's holdings in Tel Aviv in the aforementioned 39 funds reaches approximately 2.8 billion shekels at the end of 2022, about half a billion shekels higher than the value at the end of 2021. Most of the increase in value is attributed to purchases by funds on the S&P 500 stock index.

Under the influence of the increase in interest rates in the economy and the decreases in the rates in the stock and bond markets, the public transferred a huge amount of about NIS 28 billion net to financial funds in the months of April-December 2022, after withdrawing about NIS 12 billion net from these funds from January 2020 until March 2022

. In summary of 2022, the public invested about NIS 1.4 billion net into these funds. At the same time, the public withdrew a huge amount of about NIS 21.7 NIS 1 billion net from the mutual funds investing in bonds in Tel Aviv and about NIS 2.8 billion withdrawn from the funds investing abroad, mainly from the active funds.

The famous bull of Wall Street.

Beaten this year by the bear (Photo: ShutterStock)

the derivatives market

The derivatives market in 2022 was characterized by volatility and a mixed trend in trading cycles, compared to the previous year

.

The turnover in options on the Tel Aviv-35 index (monthly and weekly) amounted to about 115 thousand units per day on average in 2022, about 8% higher than the turnover in the previous year and the highest since 2019. The trading turnover in dollar options amounted to about 40 thousand units per day on average in 2022, approximately 14% lower than the average turnover in 2021. The decrease in trading turnover in dollar options is despite the strengthening of the dollar by approximately 10% relative to the shekel, which was affected by the Fed's interest rate hikes starting in March 2022, and the declines in the rates in the US that increased purchases of the currency by institutional investors who were required to hedge their investments abroad.

In conclusion, the establishment of inflation at high levels in the US, Europe and Israel forced the central banks to raise interest rates sharply during the past year, and as a result, bond investors and stock investors were harmed. Technology companies, which are highly sensitive to interest rate increases, fell sharply compared to the broader stock market. It was also an unusual year in terms of the rate of devaluation of the shekel, which was primarily due to the strengthening of the dollar in the world and the sharp declines in the American stock market.

Looking ahead, the key word is recession and the growing expectations of a global economic slowdown. The increased rates of raising interest rates to deal with inflation will lead to a side effect of an economic slowdown which will be felt all over the world. At the same time, the rate of economic slowdown and growth will not be homogeneous, so while in Europe the expected growth is negative, in the USA a relatively low positive growth is expected and in Israel, according to the data of the Ministry of Finance, we will see an expected growth of about 2-3% %.

This is an optimistic forecast, but at the same time even if there is a lower forecast and we see a slowdown in the rate of growth, it is still expected to be higher than the growth expected in the world, which will allow support for the Israeli stock market, which rests on the growth and strengths of the Israeli economy.

The more the rate of interest rate reduction begins during 2023, the more this will be a strong tailwind for the Israeli capital market.

In the short term, the interest rate increase will cause volatility, but in the future, towards the end of 2023, the current world of yields in the bond market and the declines in the stock market, will position the marketable capital market as a place for long-term investments.

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