Η XM δεν παρέχει υπηρεσίες σε κατοίκους των Ηνωμένων Πολιτειών Αμερικής.

Year of war creates cracks in Israel's borrowing strength



<html xmlns="http://www.w3.org/1999/xhtml"><head><title>ANALYSIS-Year of war creates cracks in Israel's borrowing strength</title></head><body>

Central bank puts cost of war at 250 bln shekel through 2025

Foreign investors have reduced holdings of Israeli bonds

Analysts expect more sovereign ratings downgrades

Some investors flag ESG concerns over holding Israeli assets

Adds comment from Israel's finance ministry in paragraphs 13-14

By Libby George, Karin Strohecker and Steven Scheer

LONDON/JERUSALEM, Oct 6 (Reuters) -Israel's economy has for almost a year ridden out the chaos of a war that risks spiralling into a regional conflict, but rising borrowing costs are starting to strain its financial architecture.

The direct cost of funding the war in Gaza through August was 100 billion shekel ($26.3 billion), according to the finance ministry. The Bank of Israel reckons the total could rise to 250 billion shekel by the end of 2025, but that estimate was made before Israel's incursion into Lebanon to battle Hezbollah, which will add to the tally.

That has led to credit ratings downgrades, which are amplifying economic effects that could reverberate for years, while the cost of insuring Israel's debt against default is near a 12-year high and its budget deficit is ballooning.

"As long as the war continues, the sovereign debt metrics will continue to worsen," said Sergey Dergachev, portfolio manager at Union Investment.

Although Israel's debt-to-GDP, a core metric for economic health, stood at 62% last year, borrowing needs have blown out.

"Even if Israel has a relatively good base, still it will be painful on the fiscal side," Dergachev said, adding: "And over time, it will put pressure on the rating."


Israel's finance minister has said the economy is strong, and the country's credit ratings should rebound once the war has ended.

The cost of the war is steep due to Israel's Iron Dome air defences, large-scale troop mobilisation and intensive bombing campaigns. This year, debt-to-GDP hit 67%, while the government deficit is 8.3% of GDP, well above the 6.6% previously expected.

While the core buyers of Israel's international bonds - pension funds or major asset managers lured by its relatively high sovereign debt rating - are unlikely to shed the assets at short notice, the investor base has narrowed.

Privately, investors say there is increasing interest in offloading Israel's bonds, or not purchasing them, due to concerns over the ESG implications of how the war is conducted.

Norges Bank sold a small holding in Israeli government bonds in 2023 "given increased uncertainty in the market," a spokesperson for Norway's sovereign wealth fund said.

"What you do see reflecting these concerns is obviously the valuations," said Trang Nguyen, Global Head of Emerging Markets Credit Strategy at BNP Paribas, adding Israeli bonds were trading at far wider spreads than similarly rated countries.

Asked about rising borrowing costs and investors' ESG concerns for this story, Israel's finance ministry said government finances had been "effectively managed" since the start of the war.

"Israel's robust domestic market demonstrates strong demand, and international investors remain familiar with our credit," the ministry added.

While Israel's domestic bond market is deep, liquid and expanding rapidly, foreign investors have pulled back.

Central bank data shows the share held by non-residents declined to 8.4%, or 55.5 billion shekels, in July from 14.4%, or nearly 80 billion shekels, in September last year. Over the same period, the amount of outstanding bonds grew by more than a fifth.

"Israeli institutions actually are buying more during the last few months and I guess some global investors sold bonds because of geopolitics and uncertainty," a finance ministry official said, declining to be named.

Equity investors are also cutting back. Data from Copley Fund Research showed that international investors' cuts to Israel funds, which began in May 2023 amid disputed judicial reforms, accelerated after the Oct. 7 Hamas attacks.

Global funds' ownership of Israeli stocks is now at its lowest in a decade.

Foreign direct investment into Israel dropped by 29% year-on-year in 2023, according to UNCTAD - the lowest since 2016. While 2024 figures are not available, ratings agencies have flagged the war's unpredictable impact on such investment as a concern.

All this has amplified the need for local investment, and government support.

The government in April pledged $160 million in public money to boost venture capital funding for the crucial tech sector, which accounts for some 20% of Israel's economy.

This adds to other costs, including housing thousands displaced by the fighting, many in hotels vacant due to the steep drop in tourists.

The displacements, worker shortages due to mobilisation and Israel's refusal to allow Palestinian workers in, are hindering its agriculture and construction sectors.

The latter has been a key factor curtailing economic growth - which plunged more than 20% in the fourth quarter of last year and has yet to recover. Data from the three months to end-June show seasonally adjusted GDP remained 1.5% below pre-attack levels, Goldman Sachs calculations show.

Israel has thus far had little trouble raising money. It sold some $8 billion of debt on international capital markets this year. Its diaspora bond vehicle, Israel Bonds, is targeting a second annual record haul above $2.7 billion.

But rising borrowing costs, coupled with rising spending and economic pressure, loom.

"There is room for Israel to continue muddling through, given a large domestic investor base that can continue to fund another sizeable deficit," said Roger Mark, analyst in the Fixed Income team at Ninety One.

"However, local investors are looking for at least some signs of consolidation efforts from the government."


($1 = 3.8055 shekels)


Cost of insuring Israel's debt against default spiked as hostilities worsened https://reut.rs/47UULte

Israel's drop in foreign direct investment https://reut.rs/3NdQsja


Reporting by Libby George and Karin Strohecker in London and Steven Scheer in Jerusalem, editing by Alexander Smith and Christina Fincher

</body></html>

Δήλωση αποποίησης ευθύνης: Οι οντότητες του ομίλου XM Group παρέχουν υπηρεσίες σε βάση εκτέλεσης μόνο και η πρόσβαση στην ηλεκτρονική πλατφόρμα συναλλαγών μας που επιτρέπει στον ενδιαφερόμενο να δει ή/και να χρησιμοποιήσει το περιεχόμενο που είναι διαθέσιμο στην ιστοσελίδα μας ή μέσω αυτής, δε διαφοροποιεί ούτε επεκτείνει αυτές τις υπηρεσίες πέραν αυτού ούτε προορίζεται για κάτι τέτοιο. Η εν λόγω πρόσβαση και χρήση υπόκεινται σε: (i) Όρους και προϋποθέσεις, (ii) Προειδοποιήσεις κινδύνου και (iii) Πλήρη δήλωση αποποίησης ευθύνης. Ως εκ τούτου, το περιεχόμενο αυτό παρέχεται μόνο ως γενική πληροφόρηση. Λάβετε ιδιαιτέρως υπόψη σας ότι τα περιεχόμενα της ηλεκτρονικής πλατφόρμας συναλλαγών μας δεν αποτελούν παρότρυνση, ούτε προσφορά για να προβείτε σε οποιεσδήποτε συναλλαγές στις χρηματοπιστωτικές αγορές. Η πραγματοποίηση συναλλαγών στις χρηματοπιστωτικές αγορές ενέχει σημαντικό κίνδυνο για το κεφάλαιό σας.

Όλο το υλικό που δημοσιεύεται στην ηλεκτρονική πλατφόρμα συναλλαγών μας προορίζεται για εκπαιδευτικούς/ενημερωτικούς σκοπούς μόνο και δεν περιέχει, ούτε θα πρέπει να θεωρηθεί ότι περιέχει συμβουλές και συστάσεις χρηματοοικονομικές ή σε σχέση με φόρο επενδύσεων και την πραγματοποίηση συναλλαγών, ούτε αρχείο των τιμών διαπραγμάτευσής μας ούτε και προσφορά ή παρότρυνση για συναλλαγή οποιωνδήποτε χρηματοπιστωτικών μέσων ή ανεπιθύμητες προς εσάς προωθητικές ενέργειες.

Οποιοδήποτε περιεχόμενο τρίτων, καθώς και περιεχόμενο που εκπονείται από την ΧΜ, όπως απόψεις, ειδήσεις, έρευνα, αναλύσεις, τιμές, άλλες πληροφορίες ή σύνδεσμοι προς ιστότοπους τρίτων το οποίο περιέχεται σε αυτήν την ιστοσελίδα παρέχεται «ως έχει», ως γενικός σχολιασμός της αγοράς και δεν αποτελεί επενδυτική συμβουλή. Στον βαθμό που οποιοδήποτε περιεχόμενο ερμηνεύεται ως επενδυτική έρευνα, πρέπει να λάβετε υπόψη και να αποδεχτείτε ότι το περιεχόμενο δεν προοριζόταν και δεν έχει προετοιμαστεί σύμφωνα με τις νομικές απαιτήσεις που αποσκοπούν στην προώθηση της ανεξαρτησίας της επενδυτικής έρευνας και ως εκ τούτου, θα πρέπει να θεωρηθεί ως επικοινωνία μάρκετινγκ σύμφωνα με τους σχετικούς νόμους και κανονισμούς. Παρακαλούμε εξασφαλίστε ότι έχετε διαβάσει και κατανοήσει τη Γνωστοποίησή μας περί Μη ανεξάρτητης επενδυτικής έρευνας και την Προειδοποίηση κινδύνου όσον αφορά τις παραπάνω πληροφορίες, τις οποίες μπορείτε να βρείτε εδώ.

Προειδοποίηση κινδύνου: Τα κεφάλαιά σας κινδυνεύουν. Τα προϊόντα με μόχλευση ενδέχεται να μην είναι κατάλληλα για όλους. Παρακαλούμε λάβετε υπόψη σας τη Γνωστοποίηση ρίσκου.