"The viability of investing abroad is in doubt" | Israel Today

This is what Meitav Dash, the chief economist of the investment house, states in his review. • The data also show that the current crisis has been difficult for decades, but there is a rapid recovery this year.

• The consumption basket was not significantly different from 2019

  Photography: 

  Joshua Joseph

The economic review by Alex Zabrzynski, the chief economist of the Meitav Dash investment house, shows that the epidemic did not dramatically affect the change in the composition of consumption.

"Recovery in private consumption activity was halted when an improvement in revenue in the trade industries and especially in the services industries was also halted," the review said.

The segmentation of credit card purchases in 2020, which increased by 3.2% compared to last year, surprisingly shows that the consumption basket was not significantly different from 2019.

The share of expenses for flights, tourism, recreation and leisure fell sharply from about 6% of the total expenditure on credit cards to about 2%, but in the other items the change was not significant.

For example, the share of clothing spending has dropped from just 8% to just 7%.

In contrast, the weight of spending on food and computers and software increased.

Banks are increasing credit

The number of mortgage loans in the economy increased by about 4.4% in 2020, compared with an increase of 12% in 2019.

However, the increase in the amount of mortgages reached 15.4%, compared with an increase of 13.6% in 2019. The public is simply taking out larger and larger mortgages and buying homes with higher leverage.

In December, the average mortgage amount rose to more than NIS 800,000.

The data published by the Bank of Israel show that the share of real estate loans, out of total bank loans, rose sharply in the past year and reached 56%. Not only housing loans contributed to the increase, but also commercial real estate loans increased by 9% (data per month September), a higher rate than last year.

It is quite surprising that despite the change created by the epidemic, banks continued to increase credit for commercial real estate, states Zabrzynski.

The leverage of listed companies (the debt-to-equity ratio) has not increased in the past year.

At the end of the third quarter it stands at a significantly lower level than at the height of the crises that have been since the beginning of the century, a positive indicator for the corporate bond market, Zevzynski writes.

Tel Aviv is more affordable

Despite the prevailing perception, the viability of investing in foreign equities in the last decade, and especially in the last five years, is questionable, he claims. The Tel Aviv 125 index did show a lower return than MSCI World in shekels in the last decade (lower than a decade ago).

However, its inferiority is mainly due to Pharma shares, especially Teva shares.

The real estate indices, banks and financials in Tel Aviv significantly beat MSCI Global in the same industries in shekel terms, while the performance of the technology sector was similar.

Thus, investing in most Israeli stocks in Tel Aviv yielded an excess return over the yield in those industries abroad after taking into account the strengthening of the shekel that has continued almost non-stop since 2015. Currency protection costs have only further hurt the relative returns of investing abroad.

Bad, but less than expected

The severe recession since 1946 gives hope for a strong recovery in 2021.

The US economy continued to grow in the last quarter of 2020 at a rate of 4%.

Zabrzynski raises some important points regarding activity in the US economy in the year of the plague: Although GDP fell by 3.5%, the sharpest decline since 1946, the result was much better than the US Federal Reserve expected in June when it forecast a decline of 6.5%.

The recovery in the second half of the year was particularly pronounced in the area of ​​investments.

The investment component in residential construction grew in the last quarter of the year by about 14%.

Investments in machinery and equipment also recovered rapidly, especially investments in information technology equipment - IT.

Investments in intellectual property in general recorded a growth of 1.5%.

Consumption of products increased by 3.9% compared to a growth of 3.7% in 2019. A particularly high increase was recorded in consumption of durable goods.

In contrast, consumption of services fell by 7.3%.

A decrease in total private consumption occurred despite a 7.2% increase in disposable income, compared with an increase of 3.7% in 2019. The rate of private savings rose to 16.4%, the highest since 1945.

Bottom line, Zabrzynski states, the U.S. economy contracted by 2020 at a sharp rate, but less than earlier forecasts.

An increase in investment and savings raises the growth potential for the years 2022-2021 after lowering health risk.

Dr. Gil Michael Befman, Leumi's Chief Economist, and Dudi Reznik, Leumi Capital Markets' interest rate strategist, are also optimistic about their macro review: The results of the Johnson & Johnson vaccine " "Johnson & Johnson, which requires only one dose, is easy to transport, and is also effective against the various mutations, supporting the apparent possibility of a global growth recovery later this year and next," they write.

TA 35 increased by 7%

Meanwhile, trading week on the Tel Aviv Stock Exchange opened yesterday with price declines between half a percent and 1.6 percent.

Shares of Teva led the declines with more than 4%, Elbit lost close to 4% and Discount fell 1.5%.

Delek shares, on the other hand, jumped by about 7% after reporting that the rating company Maalot S&P decided, for the first time since the outbreak of the corona crisis, to raise Delek Group's debt rating from CCC to B and at the same time raise its debt rehabilitation rating.

Moreover, Maalot determines the group's rating forecast as developing, noting that continued success in the group's operations will allow for another positive rating action.

Idan Wells, CEO of the Delek Group, welcomed the announcement: "We are pleased that S&P's rating has been raised, which is first and foremost an expression of confidence in the significant actions we have taken and the complex moves we have made in recent months, to unprecedented proportions.

The rating report and the increase in the rating, as well as the decline in the Group's bond yields in recent weeks, indicate a continued positive trend in the company's financial position. ”The stock exchange concludes January with a positive trend: the Tel Aviv 35 Index rose by 7% "A90 remained virtually unchanged, compared with a decline of up to 2% this month in the Wall Street indices.