| Highlights 2009 |
| 76% |
| The annual return on the TA-25 index. The index rebounded 105% from its low point in November 2008. |
| 152% |
| The annual return on the TA-75 index. This unusual increase can be attributed primarily to five-fold increase in the share prices of companies involved in drilling of the “Dalit” and “Tamar” natural gas fields discovered in early 2008 off Israel’s Mediterranean shore. |
| US $432 million |
| Average daily turnover in TASE equities trading. This is 20% lower than 2008 levels. Q1 average turnover came to US $300 million and rose to US $480 million for the remainder of the year. |
| US $1.7 billion |
| Total capital raised in public equity offerings and private placements of shares in Israel. This is similar to 2008 level. |
2009 marks the year in which Israel’s capital market, like capital markets around the world, began to emerge from the acute crisis it experienced over the past two years. This trend counters bleak forecasts early in the year predicting a worsening of the crisis.
Data regarding 2009 should be analyzed against the developments at the end of 2008 and apprehensions that the downward trajectory of financial markets and the real economy, as reflected in the precipitous across-the-board plunge in asset prices in the fourth quarter of 2008, would continue in Israel and around the world.
Coordinated efforts by central banks and treasuries stabilized the international financial system and alleviated fears of an impending systemic collapse of the world economy.
During 2009 initial gloomy forecasts appeared to be overstated, as downward trends became less pronounced and the harbingers of financial and macro-economic recovery were seen on the horizon. As such, the rebound in prices in 2009 constituted a natural reaction to the sharp price declines at the height of the crisis. The low interest rates prevailing in Israel and around the world contributed substantially to fueling this positive trend.
The Tel Aviv-25 index rose some 76% over the year and surpassed the level recorded on the eve of the September 2008 crash.
Equity trading was marked by relatively low turnover when compared with previous years, and as could be expected, the slowdown in primary market activity, which began in 2008, intensified in 2009.
Foreign investors after liquidating financial investments in Israel to the tune of US $2.8 billion in the second half of 2008, resumed investment in TASE-listed shares, acquiring US $1.8 billion of assets.
The rebound of the corporate bond market was also robust, as these issues posted returns of up to 45%, following a 30% decline in the final four months of 2008. Overall, the bond market in 2009 was characterized by active trading – albeit with slightly lower volumes than the record turnovers of 2008. Banks and a number of large companies raised US $9.3 billion debt in the primary market – 40% more than in 2008.
Not all developments were positive. Concurrent with the large debt offerings, a considerable number of veteran bond issuers encountered difficulties in servicing their debt and some 50 companies are currently in the process of renegotiating terms with bondholders.
The accelerated growth of the market for index-tracking instruments continued and by year’s end some 372 index products traded on the TASE. Trading activity in these instruments constituted approximately 20% of the total turnover of shares and corporate bonds. The value of public holdings in these instruments almost doubled over the year, coming to US $11.4 billion as opposed to US $6 billion at the beginning of the year. Half of this gain can be attributed to new investment while the other half to the increase in prices of the underlying assets.
Equity Market
Stock trading in Israel and the world in 2009, was marked by rising prices accompanied by great volatility. The TASE began its upward momentum some two months before positive trends emerged in the major international exchanges.
The TA-25 index gained 76% over the year; completing a 105% ascent from its low point on 23 November 2008 and remaining only 3% lower than its record November 2007 level. The largest gains were concentrated primarily in the industry's most seriously hit by negative developments abroad in 2008 – banking, insurance and real estate. These companies contributed enormously to the increase on the TA-25 in 2009.
In dollar terms, the TASE equity indices increased upwards of 75% this past year and outperformed leading indices of developed foreign markets, which at best posted a 55% return.
2009 was a good year for most TASE indices, including the Yeter-50 index of small cap shares and the Real Estate-15 index of large real estate companies, which more than doubled in value, and the TelTech-15 index of large hi-tech companies, which gained 85% over the year. These indices also stood out in 2008, with dramatic declines ranging between 65-80%.
The Finance-15 index of financial services firms, which declined 7% in the first two months of 2009 in wake of the disclosure of negative earnings in Q4 2008 and other adverse developments in the banking sector abroad, rebounded and by year’s end posted a 129% increase.
Average trading volume on the TASE equity market came to US$ 432 million, representing a 20% decline relative to 2008.
The severe slowdown in primary market activity overtaking the market in 2008 continues in 2009. This slump follows a four-year period of fervent activity that resulted in a rash of large public offerings. In 2009 equity raised in Israel by TASE-listed companies (through public offerings, private placements and warrant execution) came to US$ 1.7 billion similar to 2008, as opposed to US $5.2 billion in 2007.
Only U.S. $0.7 billion, about 40% of this year’s total, was raised through public and rights offerings, most of these occurring in the second half of the year. The remainder was raised through private placements of TASE-listed shares.
Biomed companies stood out with a large number of small offerings amounting to a cumulative US $110 million.
In January 2009, after liquidating investments of US $2.8 billion in the second half of 2008, foreign investors renewed interest in the TASE, and invested some US $1.8 billion during the 2009 year.
Net Flow of International Portfolio Investments – Equities
Net Flow of International Portfolio Investments
Privatization in Israel has been put on hold since October 2008; however the government announced during the year that it intends to sell the remainder of its holdings in Bank Leumi (approximately 11.5% interest equaling approximately US $0.6 billion) and Bank Discount (25% interest equaling approximately US $0.5 billion) in a public offering.
At the end of the year some 56 cross-listed companies traded on the TASE and at least one foreign securities exchange.
Equity market – Daily Turnover 2005-2009
Index Products
The accelerated growth of the market for index-tracking instruments continued in 2009, making it the sixth consecutive year of growth. During the course of the year dozens of new series were issued.
The market value of public holdings in ETNs in November 2009 surpassed the level it attained in August 2008, reaching US $11.4 billion, up US $5.3 billion from the end of 2008. The reason for this growth stems from new investment of US $2.3 billion as well as from the sharp increase in the value of underlying assets.
Average daily turnover in TASE equity-tracking ETNs came to US $85 million. While this is lower than last year, it constituted some 20% of total turnover in the stock market – the highest ratio since the launch of the ETN asset class in 2000. Average daily turnover of bond index ETNs came to US $50 million, slightly lower than 2008 and comprising 22% of the total turnover in the corporate bond market.
By the end of 2009 332 ETNs on 12 local and 55 foreign indices were traded on the TASE ,as well as 29 covered warrants and 11 ETNs tracking commodity indices.
At the beginning of December 2009 the TASE launched a new corporate bond index, the Tel Bond Shekel index on shekel-denominated non-linked fixed interest bonds. Within days eight ETNs were issued, including reverse notes, for a combined market value of US $80 million.
The Fixed Income Market
The impact of the crisis on the Tel Aviv Stock Exchange was substantial not only for the equity market but the corporate bond market as well. In the last quarter of 2008 apprehensions arose that many companies would not be able to service bond payments and would face insolvency. As a result, bond prices, particularly those issued by real estate companies, plunged posting double-digit losses.
At the end of 2008 bond prices began to rebound, rallying throughout 2009 as fears of corporate bankruptcies dissipated. Overall, Israel’s corporate bond market posted impressive gains of 45% in 2009. As a result of this comeback, the gap between corporate and government bond yields began to narrow.
Government bond prices, which were not affected by the 2008 crisis, rose this year as much as 11%.
The rally in bond prices in 2009 was in large part a reaction to their prior sharp fall in Q4/2008 and to the expansionary monetary policy adopted by the Bank of Israel.
Average daily turnover in the bond market came to approximately US $1 billion – slightly lower than 2008 record levels.
The decrease in government tax revenues and the widening budget deficit stimulated a substantial increase in the scope of government bond issues. The total capital raised in local government bond issues came to US $17.4 billion – the largest gross amount raised in the last decade.
In May 2009 a revival in corporate bond offerings started, after an eighteen month slowdown. In 2009 corporations raised US $9.3 billion debt capital – 40% more than in 2008, but still 55% lower than the record sums raised in 2007.
Trading in the bond market was marked by across-the-board gains for all of bond classes. CPI-linked corporate bonds posted returns of 41% over the year. This follows a 25% drop in September-December 2008. Bonds issued by the banking sector posted moderate gains of 5% on average, in contrast to bank shares, which rose sharply and contributed significantly to the ascent of the TA-25 hi-cap index.
Government bonds posted moderate gains, with non-linked “Shahar” bonds gaining 3.2%, following an increase of 14% in 2008.
The average turnover of bond trading came to US $1 billion – somewhat lower than the previous year’s record volumes.. Government “Shahar” bonds continue to command approximately 50% of total bond turnover.
Following a decline in tax revenues and an increase in government expenditures, the scope of new government bond issues grossed a record US $17.4 billion, as opposed to US $14.7 billion raised in 2008 and an average of US $7 billion in 2005-2007.
The net total of government issues in 2009 came to US $8.1 billion, as opposed to US $9 billion in 2008 and US $0.7-1.2 billion in 2005-2007. In addition, after a two and a half-year hiatus, the government issued sovereign debt abroad for a total of US $1.5 billion.
The growth of the primary market for corporate debt, which began in 2001 and peaked in 2007, was interrupted by the financial crisis. In 2009 the business sector raised US $9.3 billion debt capital in public offerings and private placements to institutional investors – 40% more than the amount raised in 2008, but still a far from the US $21 raised in 2007.
- This year there was a substantial increase in non-linked corporate debt, as approximately 43% of the debt raised in 2009 was raised in non-linked bonds, as opposed to 27% in 2008 and 11% in 2007.
- Pursuant to the increase of non-linked corporate bond issues and the discernable growing demand for additional bond indices, the TASE launched the Tel Bond Shekel index of non-linked, fixed interest, shekel-denominated bonds on 1 December 2009. At its launch, the new index included twenty bonds with a collective market capitalization of US $3.7 billion, representing approximately 80% of the total market value of non-linked fixed interest corporate bonds. Immediately after its launch eight ETNs tracking this index were issued.
Concurrent with the pick up corporate debt offerings, many seasoned bond issuers encountered difficulties in servicing their public debt. Some 50 companies began negotiating settlements with bondholders to restructure the terms of bond payments.
Derivatives Market
The volume of activity on the TASE derivatives market decreased substantially in 2009. Average daily turnover of TA-25 options came to 252 thousand contracts as opposed to 332 thousand contracts in 2008 and 385 thousand contracts in 2007.
In March 2009, the TASE launched trading in individual stock options, with options on Israel Chemicals serving as the trailblazer of this new market. Options on Bank Leumi, Bank Hapoalim followed suit in April and options on Teva in May. Trading activity in these new options has thus far been marginal.