Cease-Fire Lifts Israeli Stocks

TEL AVIV -- Just days into the cease-fire between Israel and Hezbollah, the Israeli market seems determined to pickup right where it left off before the war. A host of positive bank earnings supported war-resistant bulls, as Tel Aviv's main indices climbed to pre-conflict levels.

Shares of Bank Hapoalim, Israel's largest bank, closed 3.2% higher on Thursday after it reported second-quarter net income of roughly $150 million, reflecting a 16% return on equity. The bank's shares completed a 6% jump since the cease-fire took effect on Monday.

The TA-25 index completed a 5.4% weekly climb, closing just above its July 11 level -- the day before Hezbollah attacked Israel's northern border and kidnapped two Israeli soldiers. The Israeli banks index added 4% on Thursday, completing a 10.5% weekly surge, reflecting heavy buying on the part of foreign institutional investors. (Israeli markets are closed Fridays and Saturdays.)

With this much market resilience in face of extreme geopolitical conditions, market bears had few moments of grace during a month of uncertainty. The Kessem Short 25 ETF, which bets on the downward movement of the TA-25 index, fell 12.3% since July 12, after briefly rallying 15% on that day.

"The general mood in Israel right now is business as usual," said Yaron Bloch, head of UBS Securities Israel. "First of all, Israel couldn't have gone into this conflict in a better condition, which means that the chances it will enter a recession are very little. Secondly, most of the foreigners investing in this economy are well-accustomed to the ever-changing reality in Israel and don't panic."

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