As 2018 swings in to action, we thought we would take a look at what the local Israeli financial institutions predict is going to happen here in the coming 12 months. Whilst predictions are, as their name suggests, merely predictions, and indeed many of 2017’s predictions were either inaccurate or wide of the mark, it is nonetheless an interesting exercise to take a look at where the major players think things are going over the next 12 months.
With the Central Bank rate stuck at a historic low of 0.1%, not many analysts are predicting a change any time soon. In fact only one investment house expects a modest rate rise to 0.25%, whilst another thinks that if there is any movement at all, then it will be a downwards one towards negative interest rates. The rest see rates remaining unchanged.
After a 9% rally against the Dollar in 2017, and a 5% increase against a wider currency basket, the local analysts are predicting that at this time next year the Shekel will be weaker against the Dollar, with forecast ranging from a 3.6 – 3.75 (a weakening of between 2.5% - 8%), with the majority predicting the low end of this range.
This weakening of the Shekel echos several foreign analysts, such as Deutsche Bank, who have recently stated their opinion that the Shekel is overvalued.
The latest figures for 2017 show GDP growing by 3%, and this is indeed the average figure for predicted growth in 2018, with a range of a pessimistic 2.5% and an optimistic 3.8%.
The Stock Market
As opposed to its US counterparts, the main index, the Tel Aviv 35, returned a measly 2% in 2017. The secondary index however, the Tel Aviv 90, returned a whopping 20%.
Predictions for 2018 give a brighter picture for the TA 35, with analysts predicting an average increase of 7%, with most forecasting an increase in the range of 5-10%. These positive figures are based somewhat on a re-jig of the index scheduled for February, which will reduce the index’s reliance on the pharma sector (think Teva) and increase exposure to sectors of the economy that are showing good growth.
The sector with the most Buy recommendations among all the analysts was the finance sector, with Bank Discount, Bank Hapoalim and The Pheonix (an insurance company) getting special mention. This is due to current share prices in this sector being “comfortable”, with good growth prospects for the coming year.
Here it very much depends who you are asking. Anyone being asked who is connected to the government is absolutely positive that prices are on their way down, and point to the low number of transactions that took place in 2017 as proof that the price reductions are on their way. Most real estate companies and brokers argue however, pointing to the modest overall price rise seen in 2017, and predicting that the slow down in transactions is temporary and due to external factors.
As with all forecasts and predictions, these things should always be taken with a pinch of salt. However, it is often insightful to know how the major players in any market see things going forward.
Here’s hoping for a successful and prosperous 2018 for all!
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