During the first six days of trading in 2001, the dollar
gained 2 percent against the shekel. On Monday it closed at
4.123 NIS for a gain that day of 0.76 percent. At this
point, it is back to where it was in December. The Pound
Sterling also rose on Monday to 6.183 NIS, a gain of 0.52
percent. The EURO traded at 3.913 NIS, up 0.29 for the day.
Currency traders reported a turnover of about $1 billion.
At the end of last year, a survey taken by the Israeli
business daily Globes showed that Israeli money
managers expected the dollar to sell at 4.22 NIS at the end
of 2001. The highest forecast was for 4.50 NIS, and there
was also a low forecast of 3.50 NIS.
Bank of Israel Governor David Klein said on Friday that he
anticipates an increased demand for foreign currency in 2001
that is likely to result in a depreciated shekel. He said
that this increased demand will be caused by the lower
interest gap between Israel and the U.S., lower capital
imports in the coming year and growth in the balance of
payments.
The Bank of Israel has cut the local interest rate recently,
and has plans to make further cuts. In the U.S. the Federal
Reserve trimmed interest rates by 0.5 percent in a surprise
move last week. Further cuts are also expected there as the
American economy weakens.
The Israeli stock exchange has not been strong in recent
weeks. On Monday the Tel Aviv 100 Index closed at 454.22 a
decline for the day of 0.49 percent. The Tel Aviv 25 Index
closed at 468.31. It closed the year 2000 at 503, and at the
end of 1999 it was 484.
Nonetheless, according to the Globes survey, Israeli
money managers are bullish. Their average forecast is that
the Tel Aviv 25 will rise about 15 percent in the next year.
One manager thought that it would be over 700 a year from
now. A year ago the managers also expected, on average, that
the Tel Aviv 25 would close at 588 a year hence, though that
represented a rise of 22 percent from its level.
Interestingly, 58 percent of the Israeli money managers feel
that the U.S. NASDAQ is still well above its true value,
even after its sharp falls within the past several
months.
The money managers foresee a decline of 1 percent, on
average, in Israeli interest rates in the coming year, and
they forecast inflation of just over 2 percent. In 2000,
there was 0 percent inflation, which was lower than the
target of 3-4 percent.
The money managers opined that interest rates have the most
impact on the Israeli stock market, meaning that when rates
decline the market rises. The Israeli interest rate has been
declining steadily now for well over a year.
Globes also asked the managers which Israeli stocks
they believe are the most undervalued. Leading their list
was M-Systems Flash Disk Pioneers, Bank Hapoalim and Bank
Leumi. M-Systems makes various semiconductor components and
has important proprietary technology. Bank Hapoalim is
Israel's largest bank.
The overprice shares noted were Check Point, Mercury
Interactive Corporation, Teva and Comverse. Interestingly
enough, Teva, a billion dollar manufacturer of generic drugs
with the bulk of its sales in the U.S., was also cited as an
undervalued share.
Check Point makes security software for the Internet and it
has demonstrated sustained high growth and gains in market
share of a rapidly expanding market. However its shares are
valued very highly. Mercury and Comverse are also good
companies whose shares are valued very highly.
