Foreign investors are starting to abandon
Israeli stocks after the antitrust regulator backtracked on a
agreement underpinning the country’s largest energy project.
The Tel Aviv Oil Gas index fell to the lowest in two
years on Dec. 23, the day the regulator announcement was
published. The decision echoed last year’s government policy
change on potash royalties that sent Israel Chemicals Ltd. (ICL)’s
“Investors with other places to put their cash may say
it’s not worth the effort, let’s invest our money elsewhere,”
Bruce Schoenfeld, research director at New York-based BlueStar,
said by phone Dec. 24.
Foreign concern about regulatory shifts came as Israeli
stocks saw an improvement in investment from overseas. The Tel
Aviv Stock Exchange has seen volumes fall since a 2010 MSCI Inc. (MSCI)
upgrade of Israel to developed from emerging market status.
Foreign investment for the first 10 months of 2014 was
$1.05 billion compared with $695 million in all of 2013, though
it’s still 40 percent lower than the $1.75 billion figure for
all of 2009, according to the Bank of Israel. Daily volumes
dropped 27 percent in 2013 from 2010, and were down 2.4 percent
in 2014 through Dec. 25, data compiled by Bloomberg show.
Recovery At Risk
The regulator’s decision “puts the recent recovery in
trading volume at risk,” Steven Shein, an equity trader at
Psagot Investment House in Tel Aviv, said by phone on Dec. 25.
Orna Goren, spokeswoman for the Tel Aviv exchange, had no
Last year’s low figure for overall foreign investment came
amid investor concern over the regulator’s decision to re-examine government policy on royalties and taxes paid by
companies which use natural resources. Shares of Israel
Chemicals, which harvests potash from the Dead Sea, have
declined 29 percent since that decision.
“Israel is increasingly impossible to invest in,” Jacob de Tusch-Lec, who helps oversee £19 billion ($30 billion) in
equities at London-based Artemis Investment Management LLP,
wrote in an e-mail Dec. 25.
“The regulatory and political environment over a number of
years in different sectors has provided a changing, challenging
and inconsistent environment,” he said, adding that he has
decreased investments in the country.
Investors around the globe are obliged to comply with
antitrust laws, Israel Antitrust Authority spokesman Mark Schon
on Dec. 25 said in response to criticism.
Authority head David Gilo last week noted that the
companies control the majority of the country’s gas resources,
which can supply Israel’s domestic needs for decades, and
declared them a monopoly.
Avishay Braverman, a Labor legislator on the parliamentary
economic affairs committee and a former World Bank divisional
head, said the gas companies were overcharging. Subjecting them
to regulation was the only way to insure fair prices.
“This decision is a U-turn and we don’t know where this is
heading,” Gideon Tadmor, CEO of Avner Oil Exploration (AVNRL) LP, a
partner in the gas development, told Israel Radio on Dec. 23.
Shares of Delek Group Ltd. (DLEKG) plummeted 9.2 percent from
Gilo’s Dec. 23 decision to the Dec. 25 close. Delek Drilling LP (DEDRL)
plunged 8.2 percent in the period, while Avner and Ratio Oil
Exploration 1992 LP (RATIL) have dropped 4.7 and 7.8 percent,
respectively. The yield on Delek Group’s 4.65 percent sinkable
bond due Nov. 2022 soared 54 basis points in the period.
Ori Licht, head of research at Israel Brokerage
Investments, said the shares had a “particularly volatile”
“This just highlights the capricious nature of Israeli
regulation,” said BlueStar’s Schoenfeld. “It seems like their
statements and policies are not that well thought out and it
makes it harder to value companies.”
To contact the reporter on this story:
Yaacov Benmeleh in Tel Aviv at
To contact the editors responsible for this story:
Samuel Potter at
Gwen Ackerman, Alaa Shahine