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Troubles Spread to Tel Aviv Market, Off 5%

Nervous foreigners pull out of Israel, followed by mutual fund investors,

Tel Aviv stocks ended the week's first day of trading after the Yom Kippur break with steep losses in a sharp reaction to the escalating fighting between Palestinians and Israelis. The only stock listed on the


index to raise its head above the red ink was

Teva Pharmaceuticals

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, although that company, too, had a volatile ride.

It was hard to separate the sellers from the sellers. The morning was clearly characterized by foreign investors cutting back their Israeli positions and selling strong as the risk associated with investment in Israel had suddenly increased. In the afternoon, however, foreign investors evidently found the drops sharper than expected and the selling action shifted to the general public's shedding its holdings via mutual funds.

The losses on the

Tel Aviv Stock Exchange

slowed toward closing as prices were buoyed by gains on


. The main buyers throughout the session were mainly institutions, which were responsible for at least half the turnover.

"The peace process is one of the cornerstones of economic growth. It is on the brink of collapse. Investors will have to come to terms with a new reality in Israel," said one trader at a leading Israeli investment house, commenting on developments over the break.

Stocks lost even more ground than expected for two main reasons: the escalating violence at home and dropping prices and uncertainty on Nasdaq during the Yom Kippur hiatus. Moreover, investors noted that one of the sectors facing a harsh new reality is high tech, which is heavily dependent on intense investment activity.

Meanwhile, the Maof-25 index lost 5.21% to fall to 522.31 points and the


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index fell by 5.9% to 514.87 points. Technology was clearly not the flavor of the day: The


index sank10%. Total turnover was an enormous 882 million shekels, or $220 million, almost but not quite an all-time high for a non-expiration day.

Teva Pharmaceuticals gained 1.1% after a roller-coaster day on huge turnover of 152 million shekels or $37 million, its biggest volume ever. Traders explained that Teva had opened on a positive arbitrage gap against its New York price, and that it had overcome negative momentum sparked by

Bank Hapoalim


Nessuah Zannex

downgrades from buy to hold.

Banks weren't popular today, either. Second on the most-traded stocks list was Bank Hapoalim with a 5.5% dive, after spending last week deep in the doghouse. Second-biggest bank


also lost a hefty 4.6% and

Bank Mizrahi

dropped by 3.6%. The bank index ended the session down 4.9%. Market sources believe a major seller of bank stock was the Israeli branch of

UBS Warburg


Most of the dual-listed stocks swan dived, slapped on the right cheek by Nasdaq and on the left by the local turbulence.

Nice Systems

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sank 9.2% to trade below its price in New York.

Koor Industries


lost 8% and

Elron Electronic


plunged 10%.

Meanwhile, the violence made the dollar mighty popular. Forex trading ended with the dollar 1.03% stronger against the shekel compared with its rate Friday, trading at 4.093 shekels. The gap was even bigger at midday, when the dollar traded at 4.096.