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Foreign Investors Flee Tel Aviv

Shekel slumps as turmoil roils Middle East

All week people have been arguing about how foreign investors will react to the turmoil in Israel. This morning, 11 o'clock local time, the trend is clear: Foreign investors are panicking.

The following is a snapshot of the situation at 4 o'clock Thursday afternoon.

The forex market is reeling from a massive wave of selling by foreign investors. Anybody wondering earlier how the shekel is holding on need wonder no more. It isn¿t. The shekel is plunging. Dealers are not ruling out the possibility that it will weaken to 4.2 or even 4.3 per dollar, a level not seen for two years.

The effect of the massive purchases of foreign currency is apparently being moderated as high-tech companies and exporters buy up shekels, taking advantage of the dollar's leap in value to convert them into the local currency -- the one they use to pay salaries.

Most of the morning activity on the

Tel Aviv Stock Exchange

was by local investors. But foreign investors woke up (literally: there is an six-hour time difference between Israel and New York night now) during the last hour, and began to sell strong. During times of crisis, foreign investors don't double-check multiples, revenues or price targets. They don't leaf through analyses. They sell, not wanting to get caught with big quantities of stocks when the Middle East starts to boil. Nobody wants to have to explain in a few weeks why he didn't get out when the situation deteriorated.

Earlier this week, the Israeli investment house


was still trumpeting business as usual at the high-tech start-up conference it is hosting at the

Tel Aviv Hilton

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. Back in reality, a large proportion of guests supposed to come from abroad cancelled. The entire high-tech and venture capital industry has today been reporting cancellations by foreign investors. One high-tech entrepreneur told

today that an American he had just recruited as CEO of his start-up announced this morning that he wouldn¿t come to Israel until further notice.

Last week, the high-tech industry was debating how developing events would affect staffing. The industry had been starving for skilled labor, anyway, and suddenly the issue is of even more burning importance. The manager of one major fund said this morning that American investors had asked him to make sure to put key people in portfolio companies on a plane, lest they be called to duty by the Israeli army.

The manager of a manpower company,


, told a

writer that if the violence continues, more and more high-tech people would be looking for work abroad. She added that people thinking of going to Israel were shelving their plans.

If there was a ray of light, it was


positive opening after a week in the red. But the light died rapidly as technology stocks resumed their southward trek. Stay tuned.