Analysts’ forecasts for the Israeli securities market echo the fear expressed by rating agency S&P about some of the new government’s plans. Maxim Rybnikov, a director at S&P Global Ratings who is responsible for Israel’s rating, has told Reuters that the planned changes to the legal system in Israel could represent a risk to the country’s credit rating, while "Globes" reported yesterday that the agency has asked questions at the Ministry of Finance about the possible diversion of money from Israel’s Citizens Wealth Fund, which is meant to be for the benefit of future generations, to finance current spending on infrastructure.
Market analysts have been uttering warnings, but have also been cautious. They have not given such fears prominence in their periodic reviews, and have been guarded in their language. Nevertheless, their comments add up to a general attitude on the capital market of alertness and concern.
"As far as S&P is concerned, the independence of the Bank of Israel and of the system of justice is vital to the maintenance of Israel’s current high rating," Psagot chief economist Ori Greenfeld writes. "It is not a case of immediate risk of a rating downgrade, but, as could be seen in the past month, there is no doubt that since the announcement by the Norwegian sovereign wealth fund (that it will halt investment in companies operating in West Bank settlements, O.D.), and even more since the government was sworn in, overseas financial institutions have higher awareness of the political risk in Israel."
In a review for IBI Investment House, its chief economist Rafi Gozlan writes, "In our view, yield levels (on government bonds, O.D.) for the medium to long term are too low, both in relation to the interest rate risk and in relation to the substantial risk arising from local political change. The local market is pricing an outlook similar to developments around the world, with further interest rate rises in the coming months, and a turning point in rates in 2024, and is not giving weight to possible effects of potential change in fiscal policy, in the security situation, and in relation to the independence of Israel’s institutions."
Published by Globes, Israel business news - en.globes.co.il - on January 16, 2023.
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