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The largest bank in Europe: the legal reform in Israel could lead to a deterioration in the investment environment Israel today


Economists at HSBC Bank warn: "The government's plan may affect the institutional framework and may weigh on the Israeli currency" • The review joins those of JP Morgan and Barclays

The British bank HSBC, the largest bank in Europe, publishes a review in which it recommends buying the shekel against the dollar.

However, the bank warns against the consequences of the legal reform of Justice Minister Yariv Levin.

The official review of one of the largest banks in the world obtained by "Israel Hayom" states that "For now, we still see the decline in the dollar-shekel and our end-of-year forecast stands at 3.20. The cyclical dynamics and the balance of payments remain supportive of the shekel. The recent increase in yields is another reason which supports the shekel".

Will he listen to the economists' warnings?

Minister Yariv Levin, photo: Oren Ben Hakon

However, the economists add: "We think that it is impossible to completely ignore the latest political developments. The government's plan may affect the institutional framework, and may lead to a deterioration

in the investment environment, thus weighing on the Israeli currency. The shekel did benefit from a considerable capital inflow both through financial investments and through investments in companies Israelis over the past few years. Overall, we maintain our positive view on the shekel but believe that the government's reform, if passed, may produce a less supportive effect on the shekel."

It also states that "foreign participation in the local bond market has increased significantly since 2019 thanks to Israel's solid economic foundations and the inclusion of Israeli bonds in global indices.

The latest figures show that close to 12% of the domestic debt is now held by non-residents, equivalent to about 18 billion dollars.

This is a relatively large amount, and changes in market sentiment regarding the legal reform process may affect the shekel."

Banks fear a drop in Israel's credit rating.

The American JP Morgan (archive), photo: AFP

The latest review joins the warnings of other financial institutions in the world.

For example, the JP Morgan bank claimed that if the legal revolution is indeed realized - this could lead to effects on growth and a downgrade in Israel, similar to what happened in Poland.

Meanwhile, the London-based Barclays bank joined JP Morgan's warning.

"The agencies may lower Israel's rating forecast and even the rating if Israel's legal reform is adopted as originally proposed and the mass protest escalates," according to the Barclays statement.

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Source: israelhayom

All news articles on 2023-02-06

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