Tel Aviv market reels over crisis

Israeli politicians have been criticised for not reassuring investors

Markets in Tel Aviv suffered major losses during Sunday trading despite US moves to avert global financial crisis.

The blue chip TA-25 index dropped 6.3%, while the Tel-Tech index closed 11.5% down and the Real Estate-15 property index lost 11% of its value.

It comes two days after US President George Bush signed into law a $700bn bail-out package for US banks.

But Israel's Finance Minister Roni Bar-On said on Sunday there was "no sign of real fear".

By lunchtime on Monday, the TA-25 and TA-100 were up about half a percent.

I believe the government and Bank of Israel should undertake some efforts to explain to people that the weather is not good but you should not jump from the ship Zvi Wiener Hebrew University

Professor Zvi Wiener, head of the Finance Department at Hebrew University, said that although Sunday's drop was a "big event", it was "not panic yet".

He said that the one-day impact was partly due to the closure of the markets for several days last week for Jewish public holidays, during a period of instability overseas.

Catching up

The Israeli markets were closed from Monday to Wednesday of last week, dropped about 5% on Thursday and then trading stopped for the weekend on Friday while shares continued to slide in the US and elsewhere.

The Israeli press and commentators lambasted the country's leadership for being preoccupied with political party wrangling and failing to reassure investors.

The new leader of Kadima, the largest party in the Knesset, Foreign Minister Tzipi Livni, is currently embroiled in negotiations to form a coalition.

Prime Minister Ehud Olmert has formally resigned, although he remains in a caretaker role until a new government is established.

"I believe the government and Bank of Israel should undertake some efforts to explain to people that the weather is not good but you should not jump from the ship," said Prof Wiener.

He added that Israeli markets were less vulnerable to the global financial crisis than Europe and the US because fewer members of the public invest in the stock market, so popular panic is less likely than elsewhere.

The global financial crisis is also affecting coalition negotiations, with Mr Bar-On warning against increasing government spending in response to demands from Kadima's potential coalition partners.