“The Israeli stock market significantly underperformed last year compared to the rest of the world. There is a consensus that the Israeli stock market is cheap, but that is not always enough. We have seen markets like Japan that have remained cheap for years,” said Tamir Parder, chief investment officer, Phoenix Investment House, at the Calcalist and Kesem’s capital market conference.
In a panel on investments moderated by Yarden Rozanski of Calcalist, Parder said that there are several triggers in the local market: “In 2023, we saw three factors that clouded the market: the judicial reform, the aggressive interest rate hikes, and the war. The interest rate is perhaps the most important factor, and we see a trend change, it even began to decrease. Although in the last decision the Governor of the Bank of Israel left it unchanged, the direction is clear. As for the impact of the war, it is more difficult to predict developments,” said Parder.
To a question regarding the attractiveness of investing in technology stocks in light of their sharp increases, Rivka Elgarisi, head of the Bank Hapoalim Advising Division, replied: “In technology, there is less talk about expensive and cheap pricing. You need to be exposed to this industry. It is a leading industry in recent decades and will continue to lead. We prefer to be exposed to it through leading indices, since the ability to identify the next Nvidia is limited, but through indices it is possible to grasp the significant course of the sector. At the same time, in Israel we examine companies closely because we have the ability to get to know them.”
Also regarding the high-tech industry, Ruthi Simha Furman, founder and general partner at Viola Credit, was asked what needs to be done in order for high-tech to continue to move in a positive direction.
She pointed out that Israeli high-tech showed resilience even in the war: “People come to work even when there are missiles. Israel’s comparative advantage is known in areas such as cyber, chips, foodtech, fintech, and it is still attractive in the world. At the same time, it is experiencing a number of threats. High-tech is experiencing the decline in value we have seen in the world. In Israel there was the effect of the judicial reform which resulted in investors asking for companies to be incorporated outside of Israel, and of course the war. My fear is that we will see an exit of foreign investments from Israel. I also fear that we will see young people moving away from Israel as was the case after the Yom Kippur War, if there are no factors that have a positive effect on Israeli high-tech.”
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Hila Himi, CEO of Discount Capital, commented on the gaps between Israel and the world and stated: “In 2022, we saw a decrease in company profits and market multipliers. Now we see that while the American market is starting to experience growth again, in some sectors in Israel such as retail, we still don’t see it.”
She also estimated that after a period of stagnation in the world of M&As, they will make a return this year: “At first we will see transactions in areas such as defense and food, and slowly it will reach other industries. At the same time, in the world of technology, the situation is different, and we see a separation in Israel compared to the trend in the U.S. In the fourth quarter, we saw a disturbing picture of a sharper decline in investments in the high-tech field in Israel compared to Europe and the U.S., which began to stabilize, and the volume of hiring in Israel returned to a level similar to that of 2017.”
Himi did not sound optimistic about local high-tech, and stated that we will see further damage to companies in the industry which will be manifested in layoffs and the sale of companies at a low value. “If in 2021 we saw a peak in companies becoming unicorns, this year we will see a return to the sale of companies for tens to hundreds of millions of dollars. At the same time, to the extent that there is stabilization in geopolitics, we will also see money returning to invest in high-tech.”
