Changes in the public's financial assets portfolio in the third quarter of 2010

17.11.2010

Changes in the public's financial assets portfolio in the third quarter of 2010

	In the third quarter of 2010 the value of the public's financial assets portfolio increased by about 1.3 percent in real terms, to NIS 2.4 trillion.
	The increase resulted from an increase in the value of the tradable portfolio—an increase in the value of tradable shares and bonds, due mainly to increases in their prices on the Tel Aviv Stock Exchange (TASE).
	The share of negotiable assets in the portfolio increased by 2 percentage points in the third quarter to 53 percent, at the expense of the share of cash and bank deposits.
In the third quarter of 2010 the value of the public's financial assets portfolio increased by 1.3 percent in real terms, to NIS 2.4 trillion. The increase was due mainly to the increase in the value of the tradable portfolio––the value of the shares portfolio grew by about NIS 34 billion (7.8 percent), and the value of the bond portfolio by NIS 21 billion. Most of the increase was the result of increases in share and bond prices on the TASE. These changes led to a 2 percentage point increase in the share of negotiable assets in the portfolio to 53 percent, at the expense of the share of bank deposits and cash, which declined to 30 percent. The value of Israelis' portfolios abroad declined by 1.8 percent in the third quarter, mainly because of the appreciation (of about 6 percent)of the shekel against the dollar, which acted to reduce the shekel value of foreign assets.

Shares in Israel

Most of the increase in the value of the portfolio in the third quarter of 2010 was due to the shares component: The balance of shares held by the public increased by some NIS 34 billion (7.8 percent), to NIS 465 billion. The increase was entirely due to the rise in share prices on the TASE, whereas net investment in shares was minimal. Since the beginning of the year net investment by Israelis in shares in Israel totaled about NIS 13 billion, of which some NIS 8 billion was in new issues.

Corporate bonds

The value of negotiable corporate bonds in the portfolio increased by about 8 percent in the third quarter of 2010, to NIS 234 billion (in September). The rise was due to a 5 percent increase in their price and to a 3 percent increase in net issues (issues minus redemptions). Since the beginning of the year the value of the bond portfolio of Israel's grew by some NIS 34 billion, NIS 10 billion of which was net issues of bonds by the business sector.

The assets portfolio abroad

The value of the public's assets portfolio abroad decreased by about NIS 4.8 billion (1.8 percent) in the third quarter of 2010, to NIS 262 billion. This was due mainly to the appreciation of the shekel against the dollar, which acted to reduce the shekel value of foreign assets.

The value of the share portfolio abroad increased in the third quarter by about NIS 2.5 billion to NIS 121 billion. This increase was the outcome of net investment of NIS 4.7 billion in foreign shares, mainly by institutional investors, and of price increases in markets abroad, which were partially offset by the appreciation of the shekel.

Risks and liquidity of the portfolio

The share of tradable assets and risk assets increased by 2 percentage points in the third quarter, and they reverted to the share they had constituted at the end of 2007, prior to the financial crisis. In 2008 their share declined by 10 percentage points to about 35 percent of the total portfolio. The decline was due to the drop in asset prices, but also due to the switch to less risky assets such as cash, deposits, government bonds and makam (short term bills issued by the Bank of Israel). The share of tradable assets and risk assets started increasing again at the beginning of 2009, the result of the combination of increases in asset prices and renewed investment in shares in Israel and abroad.