Tel Aviv stocks, following those traded in Asia, again dived on Monday, as investors around the world waited in trepidation for the opening of markets in the U.S. The Tel Aviv Stock Exchange's top 25 stock index fell an additional 3% Monday after sinking 4% on Sunday. The TA 100 index fell 3% as well Monday, after a 3.68% fall Sunday.
Those declines matched the falloff in Asia on Monday alone, with the Shanghai stock exchange dropping 8.5%. Over the past two days, investors in Tel Aviv-traded stocks have seen NIS 2.2 billion ($540 million) erased from the values of their portfolio.
And the “bleeding” is likely far from over. NASDAQ futures were down 3.52% for Monday, and the Dow Jones Industrial Index was 3.12% lower, even before the opening of the exchanges. The sharp falloff expected on Wall Street will further feed the selling frenzy in Asia, analysts said – and Israel, which follows world trends, would probably see more stock market losses Tuesday.
Analysts have pointed to several reasons for the selloff, including historically high valuations for stocks, fears of a “bubble” in tech stocks, and further deflation in the commodities market – especially in oil – indicating economic weakness. The most immediate causes, however, are considered to be last week's devaluation of the renminbi (yuan) by China, making Chinese exports cheaper as manufacturers in the US were just beginning to feel confident in their business prospects for the first time since the 2008 recession – and the likelihood that U.S. interest rates will go up, signaling an end to the era of cheap money that has continued for the past seven years.
Investors in Israel have been joining the general worldwide panic, pulling cash out of mutual funds and longer-term investments. Analysts said that as much as NIS 1.5 billion ($400 million) could be pulled out of these funds Monday alone.
According to analyst Idan Azulay of the Epsilon investment fund, “the falloff in American stocks likely means that there will be no interest rate reduction there in September, as the Fed promised. This could increase pressure on the Bank of Israel to reduce interest rates from their historic lows.” An announcement on interest rates by the Bank is expected later Monday.