With bond yields at 12%, who needs stocks: Israeli stocks sink 2%

Tel Aviv stocks ended down 2% Sunday with losses almost across the board, in the wake of Wall Street's soggy performance late last week.

America's woes and the beating of regional war drums aside, there just isn't much enthusiasm for stocks anyway. "With bonds yielding 12%, who needs stocks?" said one market player. The yield on fixed-interest shekel denominated Shahar bonds has climbed above 12%. But Roy Laufer of Nessuah Zannex points out that the drop in Shahar bonds comes one day before a treasury offering of NIS 300 million worth of series 2670 bonds.

The Nasdaq tumbled 4% to end the week at a low of 1,139 points and the Dow rumbled south by another 3%, to 7,500 points.

In Tel Aviv, spooked investors sent the Maof-25 index gradually spiraling down 1.8% to 333.9 points, while the Tel Aviv-100 index fell 2% to 325.1 points and technology stocks retreated by 3.1%, weighed down by dual-listed shares. These were some of the steepest losses in weeks, as Israeli stocks had remained relatively resilient to the turbulence shaking world markets.

The total volume of trade was razor-thin at NIS 135 million, attesting to the lack of interest in stocks.

Drugmaker Teva Pharmaceuticals (Nasdaq:TEVA) sank by a hefty 2.5% on turnover of NIS 15.5 million, after starting on an arbitrage gap of 1.2%.

Other dual-listed shares pulling down the index included Partner Communications (LSE:PTNRq; TASE, Nasdaq: PART ), which fell by 1.9%, cutting a steeper mid-day loss. Another loser was Elron Electronic Industries (Nasdaq:ELRN), which sank by 1.2%, having cut a starting drop of almost 2%.

Scitex Corporation (Nasdaq:SCIX), which has gained 15% in the last two trading days, tumbled 7.3% on profit-taking.

The IDB group of holding companies skulked in the doghouse, with IDB Holding Corporation (TASE: IDBH) losing 0.7%, IDB Development Corporation (TASE: IDBD) sinking 2.4% and Discount Investment Corporation (TASE: DISI) down 2.7%. Another group company, Clal Industries and Investments (TASE: CII ), dropped by 3%.

The big banks were also in disfavor today, with Bank Hapoalim (TASE: POLI ) retreating by 1.9%, and Bank Leumi (TASE: LUMI ) sagging by 2.4% to its lowest point since February 1999. Israel Discount Bank (TASE: DSCT) lost 0.8%.

Analyst Ronit Goodman of Nessuah Zannex said today that the recent downgrade the banks suffered at the hands of Standard & Poor's damages mainly their image in the eyes of foreign institutions. But over the long run, she warned, the marginal climb in the costs of credit will roll over onto companies, with a consequent increase in defaults and bankruptcies, and hence a jump in provision for doubtful debt by the banks.