According to data from the Tel Aviv Stock Exchange (TASE), in the first nine months of 2024 Israeli citizens significantly reduced their exposure to stocks, selling about NIS 8.8 billion in net sales.
Meanwhile, long-term institutional investors took advantage of these redemptions and purchased stocks worth approximately NIS 10.2 billion. Thus far, the situation remains unremarkable.
What is remarkable, however, is that while Israeli investors continue to shift their funds and investments from Israel to overseas during times of war and significant uncertainty, foreign investors have accelerated their investments in Israel, demonstrating their appreciation for the state and the potential returns its investments can yield.
From the perspective of a foreign investor, the fear of judicial reform significantly impacted Israeli markets and the economy, surpassing the impact of a tangible, prolonged, and justified war that costs hundreds of millions of shekels per day.
According to the Balance of Payments report from the Israeli Central Bureau of Statistics (CBS), foreign investments in Israel increased by $5.9 billion in the second quarter of 2024.
This represents the largest financial increase since early 2023 – a year in which foreign investors distanced themselves from Israel due to concerns over judicial reform.
According to the TASE, this represents nothing less than a trend reversal, as in the third quarter of 2024 foreign investors made net stock purchases of around NIS 3 billion, reversing redemptions of approximately NIS 2.4 billion in the first half of the year.
A detailed report by the Jefferies investment bank, published in recent days, reviewed Israel’s economy over the past year and shows that investments in Israeli hi-tech companies have grown significantly among foreign investors.
According to Jefferies, in the 12 months preceding October 7, foreign investors participated in about 49% of fundraising rounds, and today, despite all challenges, the volume of investments has grown to 53%.
Hi-tech companies thrive
Since October 7, 2023, Israeli hi-tech companies have raised close to $9.8 billion, placing Israel in an impressive third place globally for capital raised during this period, after Silicon Valley and New York.
In addition, in March 2024, the State of Israel raised a record $8 billion in bonds from foreign investors in London, with demand for the offering reaching around $38 billion, divided among investors from no less than 36 different countries.
These positive and significant figures come despite and alongside Israel’s credit rating downgrades by all international rating agencies and the expansion of fighting against Hezbollah in Lebanon.
From a medium- to long-term perspective, foreign investors show that investments in Israel should be a part of every portfolio. Their “FOMO” (fear of missing out), reinforced by notable increases on the local stock exchange in the past year and peaks in leading indices, fortifies the investment establishment.
How can we explain the significant gap between foreign and Israeli investors?
To put it succinctly: We perceive things differently from our perspective. Foreign investors have the ability to view Israel through a cold, calculated lens.
They don’t live here and don’t understand the anxieties that come with the war – existential fear, rocket alarms and alerts, managing a household when one partner is called to duty for extended periods, and the daily uncertainty stemming from threats and different fighting zones.
In addition to all of this, we also have to contend with the government’s steadfast opposition to a state investigative committee, the widespread belief that there are no real lessons to be learned, and contentious issues such as judicial reform, the promotion of settlements at all costs, and exemptions from military service for the ultra-Orthodox sector – all of which will persist for a considerable amount of time.
However, the resilience of the Israeli economy, the extraordinary strength of the Israeli people, and their genuine desire to continue this amazing project known as the State of Israel are sources of optimism and hope that things will improve in the near future.
Let’s hope those in power don’t sabotage it.
The writer is a media consultant who specializes in large-scale, multi-national companies and advises both listed and private companies in strategic planning, branding, IPO, and crisis management.