A year ago, we asked Israel's leading portfolio managers to give their forecasts for the market in 2009. Those were the depressed days after the collapse of Lehman Brothers, and the ensuing collapse of the stock markets, and the experts estimated that 2009 would hold no good news for the economy and capital market investors. Happily, the results proved them wrong, and they now face a much tougher challenge: to predict what the year after the roller coaster of the past two years will look like.
33 portfolio managers from the banks and the leading investment houses participated in this year's "Big Money" survey. So what do they foresee, and what do they recommend?
According to the survey, the Tel Aviv 25 Index will rise to 1,212 points in 2010, within spitting distance of its December 2007 peak of 1,224 points. The index closed at 1,145 points today, so the forecast is for a rise of just 5.9%. That is the average forecast. 82% of the portfolio managers surveyed see the stock market rising by between just a few percentage points and 20%; 18% see the market falling, the most pessimistic estimate being a fall of 17%. 45% see the Tel Aviv 25 reaching a new peak of over 1,225 points.
On the global front too, the managers are conservative in their forecasts, predicting a rise of about 8% in the S&P 500.
The forecast for economic growth in Israel is 3%. None of the respondents expects negative growth: the lowest growth is 2%, while the highest is 4.5%.
Inflation in 2010 is expected to be 2.9%, near the high end of the government's price stability target range. Responses to this question ranged from a low of 1.7% to a high of 4%. On average, the Bank of Israel's key interest rate is expected to rise to 3% by the end of the year, the forecasts ranging from 2% to 4.75%.
Stocks are the investment instrument most highly recommended by the portfolio managers, even after an 88% rise in the Tel Aviv 100 Index in 2009, as much as anything because the alternatives look worse. More than half the respondents marked government bonds as not recommended. The low interest rates on high-rated corporate bonds do not compensate for the risk, according to the portfolio managers, and high-yield bonds are more favored.
As far as sectors are concerned, the banks, which took a beating in 2008, are on the recommended list for the second successive year, together with other financial stocks. This follows a 114% recovery by the Banking Index in 2009.
At the other end of the scale, the portfolio managers continue to give real estate stocks a wide berth.
Surprisingly perhaps, telecommunications is mentioned alongside real estate as a sector to be avoided by 18% of the respondents. This comes after a lively year in the sector, with Shaul Elovich's takeover of Bezeq, Ilan Ben-Dov's acquisition of Partner, and Patrick Drahi's takeover of HOT.
The choice of individual stocks is also surprising. Two favorites of recent years, Osem and Partner, are on the not-recommended list. Less surprisingly, AfricaIsrael, which absurdly enough was among the recommended stocks in the 2009 survey, joins them.
The most highly recommended stocks are "the people's share", Teva, and Bezeq.
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2009
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