TASE outperforms global markets in 2025

While global stock markets have been buffeted and battered in recent months like a ship in a stormy sea, the Tel Aviv Stock Exchange (TASE) has demonstrated impressive resilience to domestic and foreign upheavals, outperforming most of the world’s leading indices. This despite a small “bump” in mid-March, when the government began proceedings to dismiss the Shin Bet chief and Attorney General.

US President Donald Trump’s subsequent tariff policy announcement, which became a fact on April 2, only to be postponed for 90 days a week later in most of the world, has led to a global market chaos, from which TASE is now emerging with the upper hand.

The local flagship Tel Aviv-35 Index has risen by about 4% since the start of 2025, and is currently only 2% off its peak recorded in January 2025. This while the main Wall Street indices, the S&P 500 and the Nasdaq, are 14% and 19% down respectively from their peak in February (after declines of 10% and 15% since the beginning of the year).

The same applies to the major European indices. The German DAX index is 9% lower than its peak in March (but provides the best return among the major indices, with a 6.5% increase since the beginning of the year), while the London FTSE index and the Paris CAC-40 index are 6% and 11% lower than peak levels in recent months (and have only slight increases since the beginning of the year).

When examining the performance of stocks on the TASE and their contribution to the leading indices, bank stocks (and financial stocks in general) stand out above all as the main engine behind the strong performance. In recent years, these stocks have attracted both local and foreign investors seeking stability, high profits and dividends, in times of uncertainty.

The TASE Banks Index, which includes the five largest banks in Israel, has risen 18% since the beginning of 2025 to a record level, and overall has provided a return of over 60% over the past year. Alongside it, the Tel Aviv Insurance Index stands out positively, having jumped sharply by 22% since the beginning of the year and increased by over 80% over the past year.

Without the banks the market would have fallen

The dominance of these stocks is evidenced by the following figure: the weight of bank stocks (Hapoalim, Leumi, Discount, Mizrahi Tefahot and First International) comprises 33% of the TA-35 index, and the two biggest banks (Hapoalim and Leumi) each constitute over 8% of the index. Thus, if the bank stocks were excluded, the index would likely have shown a negative return since the beginning of the year.

Together with two other insurance stocks (Phoenix and Harel), the weight of financial stocks in the flagship index stands at 37% – and it may even increase with the addition of two additional insurance stocks (Menora Mivtachim and Clal Insurance) in the upcoming index update.

When examining the performance of the stocks included in the index since the beginning of the year, defense giant Elbit Systems takes first place with a return of 53% since the beginning of the year, followed by Phoenix (return of 36%), ICL (29%), Strauss (23%), Hapoalim (21%), Leumi (20%) and Harel (19%). Other bank stocks also jumped by 10% or more.

On the strength of bank stocks and the financial sector, TASE SVP Yaniv Pagot, says that this stems from a combination of several factors: “The first thing is the annual reports of the banks that were released recently, and these were strong reports that showed the resilience of the domestic banking system.

“The banks recorded double-digit returns on capital, levels that until a few years ago seemed unimaginable. If they used to talk about a return on capital of 8%-10%, suddenly the standard became double-digit (returns of between 13.8% and 19% in the past year).

He adds, “We see a banking system that has made a lot of money from the high interest rates. If at first the thought was that interest rates would fall relatively quickly, as long as they remain high – and they are the biggest beneficiaries of it – then investors price their shares accordingly.”

Other factors that contribute to banks’ profits and the attractiveness of their shares, according to Pagot, are the low level of provisions for credit losses, and at the same time additional streamlining programs, such as the one recently announced at Bank Hapoalim.

Renewed interest from foreign investors

Another factor in the strengthening of bank stocks is the renewed interest that investors are showing in the TASE. Earlier this month, “Globes” revealed data from the TASE research department, showing that from the beginning of March to April 10, foreign investors bought shares worth about NIS 4 billion – mainly in banks, as well as Elbit and NICE. The TASE noted that foreign investments are now at a five-year high.

Pagot explains that bank managements have begun to do the “legwork” and have gone on road shows with international investment bodies. He says, foreign investors “really like the exposure to the Israeli economy through bank stocks, and this is evident in the increase in their investment activity. Since the security situation has stabilized, foreigners have been buying the story of the Israeli economy through bank stocks.”

And it is not only bank stocks that have been the stars of the show since the beginning of the year. Insurance stocks have also surged by double digits – with the exception of Migdal, whose share price has remained unchanged during this period.

Leader Capital Markets VP Alon Glazer, who specializes in covering bank and insurance stocks says, “If you look only at the business results presented by companies in Israel over the past year – banks, insurance, real estate for housing – and also at all the macroeconomic data, you can understand why the markets in Israel are optimistic and continue to rise.”

Will the gains continue?

On the future he says, although banks in Israel represent, “Better than all other (stocks) the state of the economy and present very unusual profitability, I admit that when we see the threats to the local economy and the way it is managed here, and the forward projections for the global economy, I am a little more pessimistic and not sure that we will continue to see such increases.”

Infinity Portfolio Management CEO Lior Vax, believes that the banks’ outperformance stems mainly from their financial results: “Banks are undergoing major changes, they are more efficient and flexible, and therefore generate very high returns on capital, and will continue to do so according to the forecasts they recently published. Their core business is seen as something very stable.”

Vax also says that the banks, which are a reflection of the strength of the Israeli economy for investors, benefit from the high interest rates in the economy: “The higher the interest rate, the gap between the loans that banks make and the public’s deposits remains high and profitable for them.” He estimates that there is more scope for increases in bank shares.

According to Vax, Tel Aviv’s outperformance compared to the world stems first and foremost from investors’ assessment of the performance of the local economy. “We see that the economy in Israel, with all the security and political challenges, is working.”

Despite the declines on Wall Street, Vax thinks it is still too early to assess whether we are seeing a phenomenon of local savers and investors ‘returning home’, after several years in which they steadily increased their investments overseas, with an emphasis on investment tracks that follow the S&P 500 index, which recorded phenomenal returns in 2023-2024.

“Ultimately, Trump’s agenda is trying to change the order of the economy, and he is doing so with a sword that creates a lot of uncertainty. The trend could continue at least in the near and medium term.”

Published by Globes, Israel business news – en.globes.co.il – on April 22, 2025.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.