Buffett’s Iscar purchase helps fuel longest shekel rally in 32 years
The shekel completed its longest stretch of daily gains in more than three decades after billionaire Warren Buffett’s Berkshire Hathaway Inc. agreed to pay $2.05 billion for a stake in an Israeli company, the latest of almost 150 acquisitions in the country over the past year.
The shekel has rebounded 15 percent from a three-year low reached in July, leading gains among 31 major currencies tracked by Bloomberg. Net foreign direct investment in Israel tripled to $1.04b. in February from $337 million in December, Bank of Israel data show. Deals such as Berkshire Hathaway’s purchase last week of a remaining stake in Tefen-based IMC International Metalworking Cos. are supporting the currency, according to Credit Suisse Group AG.
“If you want to buy a company in Israel, you have to buy shekels to pay for it,” Anezka Christovova, a foreign-exchange strategist at Credit Suisse in London, said on Friday by phone. “If you combine that with other factors, we’ve seen a supportive flow story.”
The shekel strengthened for a 12th day on Friday, adding 0.4% to 3.5549 per dollar and capping the longest stretch of daily gains since at least April 1981, when Bloomberg started compiling data.
The Bloomberg Israel-US Equity Index of the largest Israeli stocks in New York jumped 2.5% last week as Alon Blue Square Israel Ltd. and Cellcom Israel Ltd. surged.
Berkshire Hathaway, based in Omaha, Nebraska, last Wednesday agreed to purchase the 20% stake of IMC, known as Iscar, that it did not already own. Buffett’s company took control of the Israeli manufacturer, which makes cutting gear for industries including aerospace and autos, in 2006.
Gas output
Israeli companies were the target of 148 deals totaling $5.39b. over the past 12 months, according to data compiled by Bloomberg. That’s the fourth-largest amount by dollar value in the Middle East and Africa region, after Egypt, South Africa and Nigeria, the data show.
Cisco Systems Inc., the world’s largest maker of networking equipment, agreed to buy closely held Intucell Ltd., based in Ra’anana, for about $475m. in January. NCR Corp. on February 6 completed its acquisition of Retalix Ltd., the Israeli maker of supermarket software, for about $650m., the company said in a statement.
In addition to foreign investment, gains in the shekel have been driven by the start of domestic naturalgas production in Israel and prospects the government will act to boost economic growth, according to Steven Schoenfeld, the New York-based founder of Blue Star Global Investors LLC.
Currency intervention
On Friday, the shekel closed at its strongest level versus the greenback since August 17, 2011. The Bank of Israel last Tuesday bought dollars in a bid to weaken the shekel, according to traders from Union Bank of Israel Ltd. and Bank Leumi Le-Israel. The central bank said it purchased dollars for the first time in two years on April 8.
Along with the specter of intervention, the prospect the government will create a fund to damp appreciation in the shekel limits the outlook for the currency’s strength, Schoenfeld said Friday in a phone interview.
Israel’s 1.75% base lending rate compares with a record-low benchmark of 0.5% in the euro region, the zero to 0.25% rate in the US and key borrowing costs of 0.1% in Japan. The yield differential fuels capital inflow and bolsters the shekel, Bank of Israel Governor Stanley Fischer said last Monday in Jerusalem.
The Bloomberg Israel-US stock gauge advanced to 90.52 last week, the highest close since March 21. Israel’s benchmark TA-25 Index last week slumped 0.1% to 1,204.53, paring a one-year gain of 3.2%, the least among 24 developed equity markets compiled by Bloomberg.
Blue Square
Cellcom, Israel’s largest mobile provider, posted the biggest advance on the Israel-US measure last week, jumping 8.1% to $9.88, the highest level since November 30. The Netanya-based company’s shares in Tel Aviv on Sunday added 0.1% to NIS 34.98, or $9.84.
Blue Square advanced 7.5% to $3.87 on prospects higher food prices will stoke revenue growth for the Rosh Ha’ayin-based supermarket retailer. Shares in Israel gained 1.2% on Sunday after rallying 5.1% last week.
Prolor Biotech Inc. had the steepest decline on the index last week, slipping 2.7% to $6.13. The Ness Ziona-based drugmaker’s shares in Tel Aviv fell for a fifth day on Sunday, declining 1.6% to NIS 21.60, or $6.08. (Bloomberg)