Israel Mutual Fund Withdrawals Moderate after Rising in February

This month, the Israeli public has continued to withdraw money from mutual funds that track local securities, but they have slowed down their pace.

In February alone, withdrawals from the local bourse had reached NIS 8.5 billion for investing in overseas funds over concerns that economic growth in Israel would take a hit due to the government’s judicial overhaul plans.

The withdrawals

On Thursday, the Tel Aviv Stock Exchange’s EVP head of trading, Yaniv Pagot, said that exchange-traded funds (ETFs) and mutual funds that track local bonds and share were seeing withdrawals of between NIS 100 million and NIS 150 million.

Pagot said that this was certainly a big concern amongst the people, but the panic could not be seen on the screens.

He added that the amounts or volumes were not what had been seen during the COVID-19 financial crisis and global financial crises.

Concerns have grown amongst investors that the controversial proposals aimed at curbing the power of the judiciary could have a negative impact on Israel’s sovereign credit rating.

In turn, this could harm the prosperous economy as well as currency, which would result in an outflow of funds.

Riskified is the latest tech unicorn in Israel to announce that it would transfer $500 million overseas and is offering limited relocation packages to its staff.

February

The month of February saw the Israeli public sell funds from ETFs that track bond and stock indices in Tel Aviv.

They switched to ETFs tracking the S&P 500 index and international bond indices. The total amount sold in ETFs by the public stood at about NIS 1.8 billion.

These ETFs were mostly tracking the TA-125 and TA-35 indices. Tel Aviv bourse data also shows that ETFs that track corporate bond indices worth NIS 0.7 billion were sold.

As far as the mutual fund market is concerned, February saw the trend intensify from January. The pace of withdrawals accelerated, as the public withdrew NIS 4.3 billion.

This was from mutual funds that track Tel Aviv bonds, while the redemptions that happened a month earlier had stood at NIS 2.5 billion.

The TASE

The monthly trading report of TASE for February said that the trend of trading had been affected due to the disagreements about the impact of the judicial overhaul reforms on the economy.

There had been a 5% decline in TASE’s benchmark TA-125 index in the previous month, while a 4% drop had been seen in the TA-35 index after it had remained unchanged in January.

There was a 9% decline in the TA-90 index, tracking the shares with the highest market cap that are not included in the TA-35 index, in the same duration, after it had gained in January by 1.7%.

However, there was some moderation seen last week in Israel after President Isaac Herzog had talked about a compromise.

This was after there had been a 6% depreciation in the shekel against the US dollar in February and it has dropped to its lowest level in three years. But, the currency began to stabilize in the first week of March.