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On Thursday and Friday, the NASDAQ index fell 3.9%, completing a 7.3% drop from the beginning of the year. 2.7% and 4%, respectively. In the market there are disagreements about the significance of the crisis plaguing the American markets, but regarding the trigger for the declines, there seems to be a homogeneous explanation – the rise in inflation that leads the Fed to initiate frequent interest rate hikes for the rest of the year. Interest rates four and even five times this year.
Among the risk indices – the Wicks Tel Aviv Index, which is the local fear index, jumped 36.5% during trading today. The fear index has risen more than 65% since the beginning of the year to 24 points, a record of the last 12 months. Very far from the “peak of fear” recorded in March 2020 with the outbreak of the plague, then it crossed the threshold of 84 points. At the end of the trading day today the TA-125 index fell by 2.95%, while the TA-35 index fell by Among the stock indices of the local stock exchange, the high-tech index, which fell by 4.8%, the Tel Aviv-Biomed index, which fell by 4.6%, and the Tel Aviv-Cannabis index, which fell by 4.2%, stood out among the solid indices. A-Networks Marketing decreased by 1.8% and the Tel Aviv-Family Index decreased by 2%. A trillion shekels.
Among the shares of the Tel Aviv-125 index, among the stocks that moved in the negative territory and led the index down were the share of the pharmaceutical company Ofco, which fell by 14.5% and the share of Aquarius, which develops advanced engines, which fell by 8%. And productivity network fell 8%, 7% and 6.7% respectively. Renewable Energy, which rose 0.5%, and Biogroup Bonus Shares, which rose 0.1%.
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Alex Zabrzynski
(Photo: Rami Zranger)
The chief economist of the Meitav Dash investment house, Alex Zabrzynski, today published in his weekly review data that show how exposed the Israeli economy is to macroeconomics. Zabrzynski notes in the review that the recruitments of Israeli high-tech companies from venture capital funds have been closely linked to the performance of the Nasdaq index for the past 20 years, a year behind them. Billion, far beyond what might have been expected based on the performance of the NASDAQ index in the corona year (2020). “With the weakness in the Nasdaq index, it will be more difficult for Israeli technology companies to raise capital in accordance with the valuations to which they have become accustomed in 2021,” Zabrzynski wrote.
Alex Zabrzynski: “If you look at the recent declines since the beginning of the year, which have worsened in recent days, it can be concluded that in the meantime this is a limited event.”
However, despite the falls on the Nasdaq that affected Tel Aviv today, Zevzynski, who believes we are in the midst of what appears to be a limited event in the markets, told Calcalist today that “overall we are in the aftermath of the events that began with US interest rate hikes. “B. The market fears a rise in interest rates and the publication of the central bank’s balance sheet, these are the main triggers. If you look at the recent declines since the beginning of the year, when they have worsened in recent days, I think it can be concluded that this is a limited event. And a recession. “
In Zabrzynski’s opinion, what indicates that the event is limited stems from the fact that while declines in technology stocks, we see that the spreads of US corporate bonds are not opening up that much. This is a very important sign of the economic situation. The declines we have seen in the Nasdaq index have been in similar episodes since 2010. In such declines in the past we have seen a much wider opening of the spreads (in US corporate bonds). “We were not supposed to see such an increase. Beyond that, in indices outside the U.S. we see much more moderate declines.”
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Right: Oren Montel from Psagot and Ren Tzurur from Shor-Tech
( Photos: Rami Zranger, Tal Cohen)
“In the Nasdaq index, the five largest stocks, such as Amazon or Facebook, did not fall much in the last wave,” says Ran Tzuror, CEO of the R&D Tech R&D partnership that invests in fintech and inshortech companies. At values of billions or tens of billions of dollars, including companies like Lemonade, Solaredge and others, they have fallen by tens of percent in the last three months. Some even fell by 70% -50%. Lemonade fell 82% from its peak in early August. “The collapse in Israeli stocks on the Nasdaq is a paraphrase of Haim Nachman Bialik’s song – ‘On the Slaughter.’
Ran Tzurur: “The collapse in Israeli shares on Nasdaq is a paraphrase of Bialik’s song ‘On the Slaughter.’ We need to move to stock picking and not look at the revenue multiplier “
According to Oren Montel, VP of Investments at Psagot Mutual Funds, “The ones that are hurting the most these days are fast-growing companies – which is mainly technology, so the Nasdaq index is leading the declines. “B has not fallen so recently, this is because they generally benefit from rising inflation and also rising interest rates. In the meantime, there seems to be no slowdown. “When there are declines abroad, the market in Israel is also hit, but because the market in Israel includes more stocks that are less in technology and more in industries like insurance and banks, the market here will probably be better than the US market, which will definitely be hit by rising interest rates.”
Montel also referred to the current wave of corona plague and said that “the markets do not seem to be dealing with Omicron at all. This is because it is probably a much milder disease than the original Corona. It is no longer the same Corona disease we saw at first. “Long-term. There may be a weakness in some quarters, because of the isolation, but the market is quite ignoring it. The omicron is not a factor in the markets, we are in a monetary event.”
If the correction in the markets continues, and even develops into a recession or crisis, this may have a significant effect on the most dominant phenomenon on the Tel Aviv Stock Exchange since the outbreak of the corona – the wave of issues. In 2021-2020, a record number of initial public offerings was recorded, with 123 companies conducting IPOs, and at the height of the wave, each number seemed to be winning. However, from the moment inflation began to pick up and the market began to see an interest rate hike on the horizon, the situation changed and selectivity increased. Companies were forced to compromise on value or cancel the offering, as happened in the cases of Masking, PeopleBiz and Shlomo Insurance. There are currently 16 companies whose prospectus has been published and have not yet completed the offering, and another 100 companies are in various stages of preparing the prospectus. Not sure everyone will reach the finish line.
Now all eyes are on two events – Apple reports expected to be released this coming Thursday and a meeting of Fed chiefs. A hit along the entire chain of companies, of all sizes. Because what applies to the largest company in the world, also applies to everything else. This will affect a huge number of companies, especially in the field of technology, as these are priced according to income multipliers, and once the interest rate rises or there is an expectation of an interest rate increase, their income should be capitalized by a higher coefficient, which will cut Schwein sharply.