There was no shortage of news to come out of Israel’s business world last week – one that even featured a rare visit to India by Prime Minister Netanyahu in a push for an India free-trade deal and more.
The strong relationship between the two countries, which began back in July of last year even included Indian Prime Minister, Modi, abandoning protocol to meet Netanyahu at the airport! While the global bromance between the two may have stolen the headlines, plenty came across the wire back in the homeland, including a beefed up shekel pushing the USD exchange rate down, and mixed news regarding the housing market. Plus, our trading desk sees a much busier week on the horizon, Israel’s start-up scene continues to bloom, and a majestic oasis springs up in the Negev. What could we possibly mean? Read on to find out.
1 – From the Trading Desk
It would seem the Bank of Israel decided they would not sit on their hands any longer in the face of a USD/NIS rate below 3.40, and intervened in the market with the purchase of $400 million in US dollars. While in the short term this helped to boost the exchange rate back up to 3.45, it didn’t last long as we ended the week back near the low of 3.415. All this with the backdrop of a federal government shutdown in the US.
While last week was quiet on the economic data front, this one will prove to be a little busier, including the European Central Bank interest rate decision, GDP data from the UK and the US, plus the European Central Bank President and Governor of the Bank of England making public remarks. And of course, not to be overlooked, will be the residual consequences of the US government shutdown.
2- More Shekel News
It’s no secret that the shekel has been on a seemingly non-stop run in strength that has pummeled the US dollar exchange rate to lows not seen in three years. In fact, the recent drop even included a momentary dip below the 3.40 mark, a widely regarded level of key support for the rate. One of the culprits potentially behind the recent aggressive shekel strength and perceived overvaluation is believed to be an increase in “algo” (short for algorithmic) trading, something perhaps best described as short term speculators using mathematical models to capitalize on momentum and manipulate the exchange rate. However, while the of impact algo trading has the short-term potential to be dramatic, there are measures available to the Bank of Israel that possess the ability to stem the tide, including buying foreign currency; something BoI put into action last week with the purchase of $400 million US dollars in what proved to be a successful attempt to curb appreciation in the shekel.
3- Real Estate
Looking back on it now, November truly was a chilly month and we aren’t just talking about the weather. Data released last week by the Central Bureau of Statistics showed a continued chill in the real estate sector, with the number of new home sales in November 2017 coming in at 14.4% fewer than in the same month a year earlier.
Not all the news was frosty, however, as a Bank of Israel study reported that investments in housing have actually outperformed those in the capital markets over the past ten years. Furthermore, despite the sustained decline in prices over the last twelve months, the average annual net return on investment in a residential apartment still comes in at 4.87% – an over 2% net return more than government bonds (2.66%). While on a thirty-year comparison real estate investment still trails equity investments, perhaps its meteoric rise over the past decade serves to justify what now appears to be overdue market correction.
4 – Startups
Have an idea for a great venture? This could be the time to launch it. Were you aware that Israeli startups raised a record $5.24 billion in 2017? The amount is up 9% from $4.8 billion in 2016. Even more impressive is the growth in the average financing round, which has jumped from $3.6 million in 2013 to $8.5 million in 2017. According to IVC Research Center data, there is currently about $3 billion in capital available for investments, as most Israeli venture capital funds are ready to enlarge their portfolio, so if you’re an ambitious entrepreneur ready to change the world, make sure to get your elevator pitch ready!
5 – Renewable Energy
Deserts are normally not known as the places where things blossom, but that hasn’t kept one of the most impressive clean energy complexes on the planet from sprouting up in the middle of the Negev. Known as Israel’s “Solar Valley,” the multi-billion dollar project was started in 2014 and features some of the renewable energy industry’s top cutting edge technology, including one of the world’s largest “molten salt storage systems” that not only collects energy, but stores it too. The project, which contains three massive solar power plants and the world’s tallest solar tower aims to power 10% of the State’s electric grid by 2020, with the ultimate goal of supplying renewable power to over 120,000 homes. Curious to see the “super solar site” in action? Take an in-depth video tour now.
Ok everyone, consider yourself officially caught up. Have a great and prosperous week!
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