Few Signs of Election Jitters in Calm Israeli Stocks, Shekel

(Bloomberg) -- If investors are nervous about the outcome of Israeli elections, it’s not showing in the country’s serene equities market or in the fortunes of the currency.

It’s likely to be business as usual on Tel Aviv’s stock market if voters on Tuesday deliver a fifth term for Prime Minister Benjamin Netanyahu, analysts said. On the other hand, a victory for his main opponent could unsettle investors forced to confront a change in leadership.

Short-term volatility in equities leaped in December when the early poll was called, but this has faded during the campaign. The shekel followed a similar pattern, but the price swings have been replaced by steady gains that have placed the currency among the year’s top performers.

Economic policy has played only a small role in the campaign, making it hard for analysts to assess potential scenarios. But a victory for the new Blue and White bloc, led by former military chief Benny Gantz and ex-Finance Minister Yair Lapid, could lead to a weaker shekel and a potential sell-off for local-government bonds, according to ILS Brokers Ltd.

Investors may prefer that management of the economy remains with Netanyahu, even as the widening budget deficit draws criticism, as he has the “credibility that he can get us back on track,” said Yonie Fanning, chief economist for ILS Brokers in Tel Aviv. “The initial response of a strong outcome for Gantz-Lapid in the morning after the elections would be risk-off.”

The Blue and White bloc has made clear it has an interest in using the country’s natural gas riches for infrastructure spending, potentially taking bigger sums than currently allowed from the sovereign wealth. The TASE Oil & Gas Index, composed of 13 members, has advanced near 11 percent this year, outperforming the country’s main benchmark.

The shekel is seen as a largely politics-proof currency, with Goldman Sachs strategists saying last month that there is more “room for grinding appreciation” amid strong economic growth and the high potential for gas exports. While volatility in the currency also climbed when the election was called, it has eased since the year started. The shekel is the fourth-best performer against the dollar among 31 major peers tracked by Bloomberg in 2019.

Israel’s stock market is shut for Tuesday’s voting. The polls close at 10 p.m., with final results due two days later.

Read more:

• On April 8: Bank of Israel Cuts Growth Forecast, Holds Rates Before Election
• On April 8: Look Beyond Rates for Clues About Israel’s Enigma Central Banker
• On April 5: Who’s Fighting Israel’s April 9 Election and What’s at Stake?
• On March 31: Bank of Israel Chief Urges Deficit Fixes Before Growth Slows
• On March 5: In Israel’s Bruising Election Campaign, This Is the Man to Watch

--With assistance from Yaacov Benmeleh.

To contact the reporters on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net;Ivan Levingston in Tel Aviv at ilevingston@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen

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