On Sunday, a photograph from a document allegedly compiled by the J. Investment Bank was circulated on social media. JP Morgan, the largest investment bank in the US, which signals the low risks of investing in Israel. At the end of that day, the photo landed on the printer of Prime Minister Benjamin Netanyahu waving a document in a video he uploaded in which he was proud of the recommendations written in it, despite some very problematic sentences written in it , for example: “Netanyahu undertook to enact on behalf of his nationalist partners a law that would discriminate against members of the LGBTQ community.”
● The former finance directors: the legal revolution will cause economic backwardness
● The time has come for a compromise: experts are drawing up an outline for getting out of the legal reform rut
● Roman Abramovich’s feeble attempt to save Ukraine, his reputation and his fortune | WSJ
Because the document was photographed or scanned and was not transmitted in its original form, the fear arose that it was a fabricated document, but a Globes check shows that it is an authentic document, but one that underwent several changes before it reached the hands of the Prime Minister. For example, it was marked with a marker to emphasize the positive recommendations towards the Israeli economy.
In practice, this is an email direct mail that was sent last Thursday from the recommendations department at the trading desk in London to traders around the world, including Israel. The document, which is sent to traders once in a while, apparently made its way out of the direct mail.
Is this a sign of respect for the Israeli economy?
This is not a document of the research department of JP Morgan, which indicates economic trends and provides long-term recommendations for institutional investors, but of the trading department, which provides periodic recommendations for institutional traders who usually operate for short periods, or for Nostro departments that aim for longer periods. The writer of the document is not a senior economist at the bank but a trader in the department in question. About this, a trader in the capital market told us that “this is an intraday review of traders. It is not intended to be published, and everything is written in traders’ slang. To present it as an investment bank policy paper is ridiculous”. And at the same time, it is still an official recommendation of a prestigious bank that also refers to long investment periods and has an impact on Nostro departments in banks and large investment houses. One of the authors of the review is a senior Israeli investment manager who lives in London.
The merchant who authored the document sees the political phenomena and the protest – which is also mentioned in the document – as mere background noise and according to him the Israeli institutions are strong enough, even after the departure of Prof. Moshe Hazan from the Monetary Committee of the Bank of Israel. But it also signals a risk to the high-tech industry: “The political phenomena may have a negative effect on growth if the high-tech sector is harmed by a decrease in investments.” However, the author of the document claims, the financial consequences as of last Thursday – before the meeting with the top bankers and businessmen in Israel – are low, “unless we see a real deterioration in the fiscal situation or in the independence of the Bank of Israel”, it says.
What are JPMorgan’s recommendations?
One of the recommendations is to increase the exposure to the bonds of the Israeli government for a period of five years in which JP Morgan already has a position. However, the bank also provides this recommendation for other bonds and admits that the bank “reduced the holdings following the change The latter for the price. Nevertheless, we will continue to recommend it in the medium term.”
Even before the fluctuations in the shekel exchange rate in recent days, the merchant wrote on Thursday that the shekel is still strong due to the expected increase in interest rates in February and that the institutions are acting with due caution. However, the document states that “the local market is concerned about fiscal pressures as a result of the political changes: a decrease in tax revenues, an expensive coalition and a possible credit rating downgrade”, and undertakes that “we will examine whether it is necessary to increase the market’s risk assessment when the concerns in the market begin to be priced in”.
J. According to Morgan, it is not the only bank that referred to Israel in its analyses. The rival bank Goldman Sachs also referred in its foreign exchange reviews to the recent weakness in the shekel alongside the political developments. The bank estimated that: “The political uncertainty is worrying and could continue to manifest itself in further weakness of the shekel in the short term.”
Goldman Sachs economists do not condemn the shekel, but note that “it remains to be seen whether the (legal) proposals will be fully implemented”, and estimate that “the Bank of Israel will be able to accompany the significant devaluation of the shekel through a hawkish monetary policy that may improve the situation”.