Israel: Exposed, illiquid, lacking in depth

Government dominance of Israel's capital markets leaves state funding heavily exposed to outflows like the recent mass redemption of savings in provident funds. It has also hampered the development of corporate bonds. Funding locally through the stock exchange is problematic since concentration of ownership has rendered equities illiquid. Charles Piggott reports on proposals to reform the system

Israel’s local markets are going through a rough period. During the past four months the Bank of Israel has had to intervene repeatedly in the market to support the price of government bonds. Research published by Bank Hapoalim on August 1 compared the central bank’s action to US Federal Reserve Bank intervention to preserve the financial system’s liquidity in the 1987 crash. Central bank interventions, under the government’s safety-net action, have already exceeded IS1 billion ($305.8

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