BICOM

The Tel Aviv Stock Exchange (TASE) has slumped sharply, in tandem with the plunge in global markets following economic difficulties in China.

In recent months, the Chinese economy has not performed as expected and the Chinese government has taken tough measures to prop up the market, such as lowering interest rates and devaluing the Chinese currency. However, disappointing Chinese manufacturing figures last week triggered a sudden downturn in global markets, fearing a slowdown in the world’s second largest economy.

Although Asian markets did not trade on Sunday, the TASE slumped to what Channel Ten’s financial analyst Matan Hodorov calculated as the worst single-day loss in ten years. The slump continued yesterday, as the TA-25, an index of the 25 biggest stocks, fell 3.25 per cent and the TA-100, encompassing the 100 biggest stocks, dropped 3.94 per cent.

Despite the drama on the markets, Governor of the Bank of Israel Dr. Karnit Flug yesterday announced that the interest rate would remain unchanged at 0.1 per cent. The Bank of Israel explained that, “The rate of increase in the CPI in recent months has been consistent with the inflation target.” However, the interest rate freeze was criticised by some Israeli analysts. Writing in Maariv, Yehuda Sharoni said that “we have been caught with our pants down. Under current conditions, the Bank of Israel is lacking many tools” to deal with the market plunge.

Meanwhile, the market slump followed further difficult economic news, with the release of figures last week which showed that the Israeli economy grew just 0.3 per cent during the second quarter, following only 2 per cent growth in the first quarter of 2015. In comparison, the fourth quarter of 2014 saw 6.2 per cent growth.

Finance Minister Moshe Kahlon called a meeting of industry and export leaders to discuss a plan for strengthening performance. He commented, “The figures that indicate a drop in the rate of growth are worrying me both as the finance minister and as a citizen of Israel.”