Markets in Brief
Maalot S&P has downgraded Israel Corporation bonds from AA- to A+, with a stable outlook. This comes after it downgraded the company’s subsidiary Zim Integrated Shipping Services. The analysts note Israel Corporation’s intention of supporting Zim with significantly higher cash injections than stated at the start of 2009, and Israel Corporation’s increasing dependence on dividends from another subsidiary, Israel Chemicals, which may have challenges of its own (see next brief). In short, the business risk at Israel Corporation has worsened. (TheMarker)
It’s not good news for Israeli potash producer Israel Chemicals: Bellwether company Potash Corporation of Saskatchewan, the biggest producer of potash in the world, lowered its profit guidance for the year following weaker than expected demand. Potash, which directly and indirectly controls about 22% of the planet’s potash production capacity, expects to net $3.25 to $3.75 per share, compared with its previous forecast of $4-$5 per share. Analysts had thought it would earn about $4.05 per share in 2009. (TheMarker) Advertisement
UBS has crowned Israel’s economy the most stable among the emerging markets comprising the EMEA – Eastern Europe, Middle East and Africa. The Swiss bank now predicts that Israeli gross domestic product will increase 0.3% this year, compared with its previous forecast of 0.8% contraction. For 2010, UBS is predicting growth of 3%, up from 2.7% in its previous forecast. (TheMarker)
IBI chief economist Ayelet Nir is predicting that by year-end 2009, Bank of Israel interest rates will have risen to 1%-1.5%. The central bank’s overnight rate to banks is currently 0.75%, after Governor Stanley Fischer became the first “western” central banker to raise interest rates. Nir is expecting Bank of Israel interest rates to be at 3% to 3.5% within 12 months. (TheMarker)
While on local macroeconomics, Meitav is predicting that the Bank of Israel will leave its interest rate for October unchanged at 0.75%. Or it might raise its rate by 0.25%, Meitav adds. (TheMarker)
Then there’s Barclays Capital, which thinks the Bank of Israel will raise its rate for October by 0.25% to 0.75%. The interest rate decision will be announced on Thursday. (TheMarker)
Africa Israel Properties on Sunday raised NIS 192 million in a private placement of stock. The public’s share in the allotment came to NIS 62 million. Africa Israel itself took up NIS 130 million, keeping its stake in the subsidiary at about 68%. It didn’t pay cash for the shares, instead converting loans into stock. Migdal, which owns about 6% of Africa Israel Properties, didn’t participate in the placement. (TheMarker)
Drug company Perrigo said yesterday that it’s purchased the abbreviated new-drug application for clindamycin phosphate (1%) and benzoyl peroxide (5%) gel from KV Pharmaceutical for $14 million in cash at closing, plus a $2 million milestone payment upon the completion of the technical transfer. This product is the AB-rated equivalent to Glaxo SmithKline’s pimple cream Duac. Annual sales of the brand drug run at about $165 million. Perrigo is also assuming responsibility for a patent claim against KV Pharmaceuticals, which has filed for marketing permission for its copycat version of the acne ointment (TheMarker)
Bad news for Zim Integrated Shipping Services: The index of Baltic Dry shipping has fallen 45% since the start of June 2009, to just 2,356 points. At the start of December 2008, the Baltic Dry index was at 663 points, just shy of its low from 1986. Since then the index has regained 250%. But it’s still 80% below its record high of 11,793 points, achieved in May 2009. Shipping is responsible for 80% of global trade. Prices are considered a barometer of the state of the global economy. (Nimrod Halpern)
The Antitrust Authority is demanding that Ilan Ben-Dov sell the Dynamica chain as a condition for approving his takeover of Partner Communications. Dynamica sells cellular communications equipment. The trustbuster is unconcerned about Ben-Dov selling Samsung phones in Israel through his company Suny, and owning Partner. It is less sanguine about the fact that when selling phones, Dynamica also sells a service package, which could be from rival company Cellcom. That could create a conflict of interest for Ben-Dov, explains the authority. (Amitai Ziv)